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Last June, I posted about the long and winding history of Fremont, Calif.-based Quark Pharmaceuticals, a biotech developing drugs based on a new gene-silencing technology called RNA interference, or RNAi. At the time, I labeled the company a biotech chameleon — a term I used to describe biotechs that reinvent themselves, often abruptly and without looking back.

In that sense, Quark is still a chameleon, by which I don’t mean anything pejorative — biotechs turn on a dime all the time, often for very good reasons (failed clinical trials, for instance, being a prime example). Some biotechs, however, reinvent themselves for less admirable ends, such as shifting gears to catch rising investor enthusiasm for a sexy new technology or drug-development strategy. In that earlier post, I raised the possibility that Quark had done exactly that by licensing its experimental RNAi drugs from another company and then rushing to declare itself a pioneer in RNAi therapy.

That part, however, turns out not to be true. I’ll lay out the whole story below the fold for anyone interested, but the short version is that Quark has been ill-served by earlier public statements made by its partner Silence Therapeutics that incorrectly implied that Silence had originally discovered what are now Quark’s leading RNAi drug candidates. These are the statements I alluded to in an earlier post, in which I quoted Quark CEO Danny Zurr saying that Silence had been “deceiving the public” by inaccurately describing the two companies’ relationship.

After looking into the Silence-Quark partnership more deeply, my current understanding is that Quark developed both its leading RNAi candidates with help from Silence, but only licensed certain nucleic-acid chemistry from its partner, not the RNAi molecules (or sequences) themselves. The bottom line is that Quark appears much more justified in its claim to be a leader in RNAi therapeutic development than I originally thought.

Before getting into all that, a quick update on Quark’s recent funding efforts. Gavin Samuels, the company’s VP for business development and investor relations, says Quark has lined up a syndicate of investors who have pledged roughly $20 million of the company’s intended $30 million funding round. The final $10 million may be provided by new investors who join that syndicate, although Samuels said Quark may also simply wait another three months or so to raise those funds. One factor weighing on the company is a pending “milestone” payment Quark is expecting soon from Pfizer, and whether that will be enough to carry the company into mid-2009 without the need to raise another $10 million. (Biotechs love such milestone payments, which are typically “non-dilutive” cash infusions that don’t shrink startup founders’ ownership stakes or require other existing investors to pony up in order to maintain their stake in a company.)

Samuels also told me that Quark’s abortive IPO last year foundered for both internal and external reasons, including market jitters following the huge Blackstone Group IPO last June that hit right as Quark was hoping to price its offering. The company itself, however, wasn’t blameless, he says. For instance, Quark may have jumped the gun by trying to go public when it only had one drug in early-stage human testing; in addition, Samuels says, the startup hadn’t done enough to make its case with journalists and market analysts.

Anyway, on to the convoluted history of Quark and Silence after the jump.

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House-Senate confrontation set over biogenerics – Late last month, a key group of senators reached agreement on legislative provisions that would authorize copycat versions of biotech drugs, which are typically complex proteins manufactured by genetically engineered cells (see details here and here). These provisions would finally put biotech drugs — which don’t face cut-rate competition once their key patents expire — on a par with traditional pharmaceuticals, and have been a long time in coming. They’re not perfect, but they’re about as good a compromise as we’re likely to see any time soon..

The catch is that biogenerics supporters want to attach this langauge to a reauthorization of the FDA’s user-fees act, the awkwardly named PDUFA, which has to pass by September to keep the FDA operating smoothly. The Senate’s version passed in May, whereas the House just approved its version yesterday — but didn’t include a biogenerics pathway. The senators want to add it to their version of the bill, which has to be reconciled with the House version in a conference committee. But key House members, including Energy and Commerce Chairman John Dingell, a Michigan Democrat, appear likely to object, since they haven’t had a chance to weigh in on the provision.

The upshot: Turf wars between the houses of Congress may cost us our best shot at biogenerics legislation in some time. Tying the measure to PDUFA would be one of the best ways to sidestep legislative roadblocks that opponents and their biotech/pharma backers are likely to throw up — but the window is closing rapidly. The WSJ has more here.

Digital medical records are good for your health — or are they? One of the strongest arguements for digitizing medical records is that they’ll help prevent medical errors and improve medical care. A recent review of other studies in the journal Health Services Research gave digitized records a strong vote of confidence when it found that hospitals that switched to electronic drug-ordering systems saw a 66 percent drop in medication errors. (Such mistakes apparently kill 500,000 U.S. hospital patients every year.) Similarly, a report from the Pharmaceutical Care Management Association predicts that electronic prescribing could save Medicare as much as $29 billion over the next two years while preventing two million medication errors.

As with any technology, however, electronic records are no panacea. Another study of walk-in doctor visits found no improvement in treatment quality among practices that used electronic medical records versus those that still relied on paper. The study’s conclusion: Implementing digitized records is just the first step — doctors and medical groups still need to do a lot of work to get the most out of them.

On a related note, a Senate committee recently passed legislation that would offer subsidies to convince doctors to install digital health-record systems.

RNAi is hot, hot, HOT — Once again, it’s boom times for a new drug technology, and this time the spotlight is on RNA interference — a fascinating but largely unproven method for turning off individual genes by using a short stretch of double-stranded RNA to activate ancient gene-silencing machinery inside cells.

The party really got started last year, when Merck paid $1.1 billion to acquire Sirna Therapeutics, a fledgling RNAi company that had barely managed to move a single drug into an early-stage trial. Now things have heated up even further. Last Friday, AstraZeneca struck a $400 million deal with Silence Therapeutics. Then on Tuesday, Roche stepped up to forge a $1 billion deal with Alnylam, an early pioneer in the area.

What’s worth remembering is that no matter how promising a technology like RNAi seems, putting it to practical use almost always takes far longer and costs more than people expect in the early stages. Just take a look at the roll call of other drug technologies that have undergone similar cycles of hype and disappointment — gene therapy, antisense, therapeutic vaccines. All remain promising — but none of them worked the first time out of the gate. Even monoclonal antibodies took close to two decades before anyone could make a reasonable drug with them. Maybe RNAi will be different — but I wouldn’t bet my wallet on it.

Have cancer vaccines gotten a raw deal? A paper in Clinical Cancer Research (described here) argues that regulators and companies may be too quick to dismiss clinical-trial results if they focus on tumor shrinkage rather than long-term outcomes like survival. That may well be true, as tumor shrinkage is a notoriously bad measure of whether drugs work or not, although it’s also worth noting that a reconsideration still wouldn’t have helped Dendreon’s Provenge vaccine, since its survival data was so statistically equivocal. (Separately, the SEC has now opened an informal inquiry into Dendreon’s public disclosures about Provenge this year.)

DNA transplant “transforms” microbial species – J. Craig Venter’s group at his eponymous institute takes the honors, described here in the WaPo. Next up: Transferring an entirely synthetic genome into a DNA-less microbe to create “artificial life,” something Venter says may happen within months. Similarly, here’s the NYT on the new science of “synthetic biology.” Brace yourselves.

Does “pay for performance” improve medical care? A few weeks ago, the WSJ said no, citing a Medicare experiment. Today, the NYT says yes, citing… a Medicare experiment! I’ll have more to say once my head stops hurting.

Pre-implantation genetic diagnosis may harm fertility – Or so say the authors of a Dutch study described by the WSJ here. Several researchers seem to think the results need to be verified elsewhere before abandoning the procedure, in which a single cell is extracted from an IVF embryo for genetic analysis.

Stem cells tailor their own environments — At least according to Canadian researchers, who explored the specifics of how embryonic stem cells communicate with the cells around them. The Globe and Mail has the story.

Simple enzyme short-circuits bacterial drug resistance – Basically, it prevents bacteria from swapping the genes that confer resistance to antibiotics.

High-throughput output –

• Vermont sets up a Web site comparing pharmacy drug prices (Kaiser)
• Researchers discover molecule that may promote food allergies (BBC)
• Breast-cancer risk genes may not influence survival (WSJ)
• Congressional Democrats want to know who muzzled the former surgeon general (Bloomberg)
• Scientists identify gene linked to autism (BBC)
• Robotics help stroke patients regain function (NYT)

(NOTE: This item originally incorrectly stated that J. Craig Venter’s company, Synthetic Genomics, was involved in the research that transplanted one microbe’s genome into another. In fact, it was Venter’s own research institute, the J. Craig Venter Institute.)

(UPDATED: See below.)

For some reason, biotechnology is rife with chameleons — companies that suddenly and radically alter their scientific strategy, disease focus or business model, sometimes to recover from a major failure, and sometimes just to be whatever faddish investors want them to be.

Today, for instance, Quark Pharmaceuticals — now a Fremont, Calif., developer of drugs that work via a new mechanism known as “RNA interference” — said in an SEC filing that it now hopes to raise as much as $80.5 million in an IPO. (That SEC document is here).

Quark, which is backed by Larry Ellison’s Tako Ventures, describes itself in the filing as a “clinical stage biopharmaceutical company” with an “initial focus” on drugs that work via RNA interference, or RNAi — a Nobel Prize-winning technique for “silencing” particular genes using carefully engineered snippets of RNA. It has two RNAi-based drugs already in human testing — RTP-801i, for a form of blindness called age-related macular degeneration, and AKIi-5, for kidney failure. RNAi drug development is getting a lot of big-money attention these days, as witnessed by Merck’s $1.1 billion acquisition of the RNAi biotech Sirna Therapeutics last year. (Pfizer has signed on to co-develop Quark’s RTP-801i.)

Quark, however, is a relative newcomer to RNAi, although that fact isn’t exactly clear in its filing. It acquired both of its leading drug candidates from Atugen AG, now a unit of Silence Therapeutics (which, confusingly enough, was formerly known as SR Pharma). The name Quark Pharmaceuticals is also new; until this month, the company was known as Quark Biotech, and before that as Expression Systems.

In other words, Quark’s conversion to RNA interference, or RNAi, looks like a classic chameleon move, made possible by its ability to quickly in-license drug candidates based on a hot new technology, thus allowing it to tout itself to investors as a cutting-edge biotech.

Based on what I know at the moment, I can’t say one way or another if Quark’s RNAi work is truly cutting-edge. I do, however, know that the company has an interesting and unusual pedigree that for most of its history had nothing to do with RNA interference.

Although founded in California in 1994 as Expression Systems — the name presumably refers to gene output, or “expression” — the company has long maintained its principal research facilities in Israel. Over much of its history, in fact, the company has frequently been classified more as an Israeli biotech than an American one. Consider, for instance, its listing on the Israeli Life Science Industry Web page. In addition, Quark’s SEC filing lists among its risk factors the fact that “[w]e have significant operations in Israel, which may be adversely affected by acts of terrorism or major hostilities.”

In 1997, the company renamed itself Quark Biotech and began to focus on genome-based drug development — that is, on identifying genes linked to specific diseases and then finding drugs that turn off those genes or otherwise mitigate their effects. In general, this sort of strategy hasn’t worked out so well, both because most of these disease-gene links have been faulty and because most genes have only a limited impact on disease.

Like other companies at the time — most notably Lexicon Genetics and Deltagen — Quark apparently thought it could identify these genomic drug targets by breeding mice in which important genes had been “knocked out.” A multi-year genomics research collaboration with the Cleveland Clinic Foundation led it to take the unusual step of moving its headquarters to Cleveland in 2001. Just two years later, however, when the company announced that it had created a mouse that totally lacked cholesterol — a discovery momentous enough for Science to publish it — the Cleveland Clinic wasn’t among its collaborators, and the company’s headquarters had moved again to Fremont, Calif.

Quark’s involvement with RNAi seems to date only back to 2004, when it licensed RNAi technology from the Silence Therapeutics unit Atugen. That collaboration pertained specifically to a gene called RTP-801 that appeared to play a major role in inflammation. The next year, the two companies expanded their agreement to cover RNAi drugs for five other undisclosed genes. Silence Therapeutics revealed that AKIi-5 was one of them in this press release:

SR Pharma expects to begin the clinical development of its proprietary AtuRNAi therapeutic molecules for systemic cancer indications in 2007. SR Pharma has sublicensed the AtuRNAi compound RTP-801i to Pfizer through its collaboration partner Quark Biotech Inc. for the treatment of Age-related Macular Degeneration (AMD) and a number of other indications. This compound entered the clinic in early 2007. In addition SR Pharma has licensed a further AtuRNAi compound, AKIi-5, to Quark Biotech Inc. This compound has been granted an IND for acute kidney injury and is expected to enter the clinic in 2007.

That’s just part of Quark’s interesting history. It has long worked with several Japanese pharmaceutical companies, which explains why its second and third-largest shareholders are two Japanese investment partnerships, the Trans-Science Global Bio-Technology Fund and Asuka DBJ Investment LPS. (Ellison’s Tako Ventures is the largest investor, with 42.3% of the company.)

Quark hopes to price up to 5.75 million shares between $12 and $14 apiece, which would make Tako’s 5.6 million shares worth as much as $78.4 million. Overall, the company could have a market capitalization of as much as $256 million following the offering.

Biotech chameleons like Quark are fascinating because of the ease with with they shed their skin and morph into something new, often without ever looking back. Some, of course, do so for perfectly legitimate business reasons, while others seem most eager to catch new trends and to ride them as hard as they can.

It’s often hard to tell which is which, though, which is one reason I hope to occasionally spend some time looking at particular biotech chameleons to see how far their public image diverges from their actual history. After all, there’s nothing wrong with making a fresh start — at least so long as potential investors know exactly what they’re getting into.

UPDATE: Turns out Silence wasn’t such an authoritative source on the details of its partnership with Quark. I revisited the subject and laid out the company’s obfuscatory language and how it Quark’s actual role in developing its RNAi drugs in this post.