An affinity for Graffinity

STRASBOURG, France—NovAliX announced at the end of August ithas entered into drug discovery collaboration in the field of osteoarthritiswith Galapagos NV. Under the terms of the agreement, NovAliX will beresponsible for the discovery of specific small-molecule lead candidates for anovel, validated osteoarthritis target chosen by its new partner.

NovAliX will receive technology access fees, researchfunding and is eligible to receive success-based milestones from Galapagos. Thepartners are eyeing the European market (primarily France and Germany), butalso seek to grow in Japan and the United States.

NovAliX will identify hits using its Graffinityfragment-based screening technology that combines chemical microarrays with aproprietary SPR imaging method for the detection of compound-proteininteractions. It will then further work toward the lead candidate stage byapplying its medicinal chemistry and structural biology expertise.

The name "Graffinity" comes with some history. Graffinitywas originally a company formed in 1998 funded by U.S. and European partners topioneer the chemogenomics space combining SPR and microarrays. Built fromscratch, it took a few years to bring the technology to the appropriate level.

Over time, the original company took on other partners andchanged its focus, but in 2005, Graffinity was re-established as a separatelegal entity. The new Graffinity was then on the road to market its uniquescreening capability with good success, as it has since inked deals with giantsin the biopharma space such as Genentech, Amgen, Rigel, Pfizer, Elan andBoehringer-Ingelheim.

Company officials say the Graffinity platform is suited forsoluble proteins and has been successful with kinases, proteases,protein-protein interactions and most recently with intrinsically disorderedproteins (IDPs) that are challenging to screen with other methods.

"We look forward to utilizing NovAliX's capabilities inbiophysics and lead-generation methodologies for this novel target-based drugdiscovery program," said Dr. Graham Dixon, senior vice president for drugdiscovery at Galapagos, in a prepared statement.

NovAliX officials say the two companies have enjoyed a"longstanding relationship." In part, this relationship is described asincluding a fee paid to Galapagos for service-based chemistry and medchemsupport.

As for Galapagos, it will provide two things to thecollaboration: an expertise in drug development, and a strong expertise in theosteoarthritis field. The company has a history in a cascade of other mergersand spin-offs that has led it to its strong current position in its field. NovAliXofficials point to Galapagos' key areas of expertise and multiplepharmaceutical alliances in the joint and bone diseases field as attractiveattributes.

For its part, Galapagos was described as enticed byNovAliX's technology toolbox and trusted medchem expertise, which is reveredbecause of past results.

Stephan Jenn, president of NovAliX, says this "drugdiscovery collaboration with a leading European biotech confirms the quality ofour technologies and science, and underlines the value of our platform as animportant tool to deliver valuable lead candidates."

In key ways, the two companies differ. NovAliX is private,rather discreet and still small, yet it strives to build a company thatprovides external research capabilities with strong technology. The companycalls its most attractive trait "integrated drug discovery," but notes itgoes beyond basic pharma because of biophysics capabilities that appeal toother industry sectors.

NovAliX provides enabling chemistry and biophysicaltechnologies to support the

pharmaceutical industry's outsourcing needs from discoveryto manufacturing. With proprietary SPR technology, X-ray proteincrystallography, supramolecular mass spectrometry and chemistry, NovAliX offerscomprehensive integrated services for small-molecule drug discovery.

With advanced NMR technologies, NovAliX also provides finecharacterization of biologics, thorough analysis of APIs and polymorphismstudies to support pharmaceutical development and manufacturing teams. NovAliXGroup, a team of 120 scientists, is located in Strasbourg-Illkirch, France andHeidelberg, Germany.

Galapagos, in contrast, is a big, public pharmaceuticalcompany. One NovAliX official calls Galapagos, in his words, "gold diggers,"while NovAliX "sells sieves and shovels." The two companies' goals are alignedas they don't compete with each other, but their combination of skills andcapabilities complement each other.

Galapagos specializes in the discovery and development ofsmall-molecule and antibody therapies, and it is progressing one of the largestpipelines in biotech, with six programs in development and more than 50discovery programs. The Galapagos Group has about 800 employees and operatesfacilities in six countries, with global headquarters in Mechelen, Belgium.

Galapagos' first-half revenues slide on milestonepayments

MECHELEN, Belgium—Due to the timing of alliance milestones,Galapagos NV recently reported that its revenues in the first half of the yearwere lower than the same period in 2010.

Revenues from continuing operations for the first half of2011 were $54.2 million, compared to $62 million in the first half of 2010. TheR&D division reported revenues of $26.4 million, compared to $37.5 millionin the same period last year.

In contrast, the company's service division had a good firsthalf, attaining 15 percent external growth, Galapagos CEO Onno van de Stolpesaid in the company's earnings release that in addition to moving its 50-plusR&D programs forward in the first half, Galapagos' portfolio now has fourclinical trials that are expected to deliver efficacy or proof-of-mechanismdata by year's end.

"Galapagos is in a cycle where many of our businessobjectives are achieved in the last months of the year," van de Stolpe added."With a potential new alliance in the pipeline and a number of achievablediscovery milestones scheduled for the last quarter, we see opportunities toreach our full year 2011 guidance, but with the intrinsic challenges ofR&D."