MONEY

Ebola crisis pushes NewLink into limelight

Matthew Patane and Tony Leys
mpatane@dmreg.com

Ames-based NewLink Genetics has spent its 15 years of existence quietly losing millions of dollars in pursuit of a breakthrough cancer-fighting drug.

Its presence is quiet no longer. It turns out, as Ebola began killing thousands of people in West Africa this year, that the company held a license for a potential Ebola vaccine. At the same time, it's in the final phase of trials that could lead to marketing a possible blockbuster cancer-killing vaccine.

In recent months, the company has signed on new executives, leased commercial space in Austin, Texas, and inked deals that could be worth more than $1 billion.

It's heady stuff for a company that has never turned a profit and is a tiny player (about 120 employees) in a pharmaceutical industry dominated by corporate giants.

NewLink took a $200,000 flier in 2010 on an Ebola vaccine that Canadian scientists had developed but had not yet tested in humans. The vaccine is outside the Iowa company's usual expertise in cancer therapies. But few others showed serious interest in a way to fight Ebola until this year's deadly outbreak. Now, NewLink could earn $50 million for its part in a global, high-profile effort to stop a humanitarian crisis.

"It is a very big question: Had there not been this particular Ebola crisis at this particular moment, would we be sitting talking about NewLink and Ebola? Probably not, because it would have been very much an under-the-radar-screen asset for the company," said Mara Goldstein, an analyst at the Cantor Fitzgerald investment bank.

All of that comes as NewLink prepares to bring its first product to market. Commercialization would be a significant step for the company, which has been grinding through the lengthy, expensive process of developing cancer-fighting drugs.

Mission: Cancer fight

NewLink's big payday on the Ebola vaccine was announced Nov. 24, when securities filings disclosed it had signed a licensing agreement with pharmaceutical heavyweight Merck to ramp up production of NewLink's Ebola vaccine.

Under terms of the deal, NewLink will be paid $30 million up front and $20 million upon initiation of human trials to test the effectiveness of the vaccine, expected to begin in the first quarter of 2015.

However, the Ebola windfall isn't where the company's future likely lies, according to analysts.

"We really just look at Ebola as the potential to become a modest annuity over time," Goldstein said.

Instead, NewLink is pushing forward with its cancer therapies.

In February, NewLink announced it had leased the Austin office. The company plans to use the space to commercialize its drugs, NewLink said in a regulatory filing. It also has hired a new chief financial officer, Jack Henneman, for the express purpose of bringing the company's drugs to market. Henneman, based out of Austin, replaced former CFO Gordon Link.

"The clear signal was hiring somebody who had commercial experience, because in a very rapid time period the company could be facing commercializing not just one product, but three," Goldstein said, referring to the Ebola vaccine and two cancer therapy platforms under development.

NewLink officials said they couldn't spare time to be interviewed for this article.

Founded in 1999 and located in the Iowa State University Research Park, NewLink's primary focus is to develop therapies that use the body's immune system to fight cancer. Its leaders include Chairman Charles Link, whose experience includes leading the John Stoddard Cancer Institute in Des Moines, and President Nicholas Vahanian, who worked as a genetic researcher for the National Institutes of Health.

The NewLink therapy closest to being marketed is the cancer vaccine HyperAcute. A version that targets pancreatic cancer is in a Phase 3 trial, one of the last steps before federal authorities would consider approving it for sale. Another version of HyperAcute that targets lung cancer is in an earlier step of the process.

Cancer vaccines are different from the vaccines most people are familiar with. Instead of preparing the body to ward off viruses or bacteria before infection, cancer vaccines help the immune system target and kill cancer cells after they appear.

A national expert on pancreatic cancer said that although dozens of possible cancer vaccines are in the works, only one has been approved by federal authorities, and it is aimed at prostate cancer. Dr. Robert Vonderheide, who works at the University of Pennsylvania's Abramson Cancer Center and is an adviser to the national Pancreatic Cancer Action Network, said the fact that NewLink's pancreatic-cancer vaccine has reached a Phase 3 trial is an important development.

Pancreatic cancer is one of the deadliest types of cancer. Five-year survival rates after diagnosis range from 1 percent to 61 percent, depending on when the disease is caught and whether surgery is possible, according to the American Cancer Society.

Although there is no guarantee that the NewLink vaccine will be approved for sale, "there is justified hope that immune therapies, including vaccines, will become an important part of treating pancreatic cancer," Vonderheide said. Such therapies probably would be used along with other drugs, he said.

Focus on immune system

Besides the pancreatic-cancer vaccine, NewLink also has been working on more general approaches to using the immune system to fight cancer. That work recently led to a huge deal with Genentech, a California-based firm that is a major player in developing cutting-edge therapies. Genentech paid $150 million up front and offered more than $1 billion in potential rewards to partner with NewLink.

Christian Hordo, a Genentech manager who led negotiations for the partnership with NewLink, said the Ames company's leaders have been working for decades on an area of medicine that has come into vogue recently.

"It was their steadfast commitment to the potential of cancer immunotherapy that really ultimately led us to do this partnership," Hordo said. "Cancer immunotherapy really has the potential to fundamentally change the treatment paradigm for cancer. ... Our own immune systems really are the most exquisite weapon available to fight disease."

Genentech's partnership with NewLink will focus at first on a drug known as NLG919. The drug is designed to counter cancer cells' ability to hide from the human immune system. Genentech is taking over development of the drug, which it will test in combination with other drugs it is working on.

As NLG919 blocks the cancer cells' cloaking action, the other drugs would "step on the gas" of the immune system, Hordo said. "The hope is that by doing those two things in concert, you're going to be able to very effectively attack and hopefully kill the tumor."

With any new drug, human trials start small to check for safety issues. In this case, those concerns would include making sure the immune system isn't goaded into attacking healthy tissue. Hordo said the hope is that immunotherapies against cancer would have fewer complications than chemotherapies, but it's too soon to say whether the new therapies would be used in conjunction with those drugs. He also said it's too soon to say which types of cancer would most likely benefit from the approach, or when patients could expect the new drugs to be widely available.

"The promise has yet to be fulfilled, but hopefully in the not too distant future, we'll start to see really meaningful benefit for patients," Hordo said.

Piling up years of losses

Bringing new drugs to market isn't for the faint of heart. The bonanza that NewLink has reaped from licensing the Ebola vaccine doesn't come close to erasing the tens of millions in losses it has racked up annually to bring its cancer drugs to this point.

The company raised $43 million in its initial public offering in 2011, but had hoped to raise $86 million. Its losses have risen from $18.1 million in 2011 to $31.2 million last year, resulting "principally from costs incurred in our research activities," the company said in a third-quarter regulatory filing. Losses for the first nine months of 2014 were nearly $24 million, and its total deficit stood at $160 million.

The company expects more red ink.

"Our operating losses will substantially increase over the next several years as we expand our commercialization activities and our discovery and research activities," it said in the third-quarter filing.

Experts see much promise in cancer immunotherapy research, as well as much uncertainty.

Dr. Joseph Camardo, a fellow of the College of Physicians of Philadelphia and an adviser to the History of Vaccines program there, said he is generally optimistic about the idea of using vaccines against cancer. But the path forward isn't clear, he said.

"I think some of them will work, some of them won't, and it won't happen on the timetable we want," he said.

Camardo, who works in New York, is a senior vice president at the pharmaceutical company Celgene. He said the fact that a cancer vaccine has made it to a Phase 3 trial is encouraging, but no guarantee.

"Everybody who's been in this business knows that many drugs that made it into Phase 3 still haven't worked," he said.

Phases of drug trial

Here are how U.S. drug trials are run, according to the Food and Drug Administration:

ANIMAL TESTS: Before using a new drug in humans, developers must first test it in animals, to see if it has the desired effect or harmful side effects. If the animal experiments are successful, the drug developers must apply to the FDA for permission to start drug trials in humans.

PHASE 1: If the FDA approves, the developers start with a Phase 1 trial, in which about 20 to 80 healthy volunteers are given the drug to see if it has side effects and to monitor how it is metabolized in the body.

PHASE 2: If the Phase 1 trial is successful, the developers may conduct a Phase 2 trial. Hundreds of volunteers with a disease or condition are recruited. In many trials, some of the volunteers are given a placebo or a different drug. The results from the two groups are compared, and scientists continue to monitor for safety.

PHASE 3: If the Phase 2 trial is successful, the developers can seek permission for a Phase 3 trial. Such studies typically involve thousands of volunteers, often from different types of populations. The drug may be given in different doses and in combination with other drugs. At the end of a successful Phase 3 trial, the manufacturer can seek federal permission to market a new drug.

8-YEAR AVERAGE: The American Cancer Society estimates it takes an average of more than eight years for a drug to make it through trials and be approved. More than 90 percent of possible drugs fail at some point in the process. Drug trials routinely cost tens of millions or hundreds of millions of dollars.

About NewLink's founders

Charles Link, chairman, chief executive officer and chief scientific officer: A native of Ohio, Link has abachelor's degree from Stanford University and a medical degree from Stanford University Medical School. He did a fellowship at the National Cancer Institute in Bethesda, Md. He came to Des Moines in 1993 and served as director of the John Stoddard Cancer Institute. He also worked as a part-time practicing oncologist with Medical Oncology and Hematology Associates of Iowa until 2013.

Nicholas Vahanian, president and chief medical officer: He has a bachelor's degree in biology from Virginia Commonwealth University and an MBA from the University of Notre Dame. He also attended St. Bartholomew's and Royal London Hospital Medical College. He completed a molecular oncology fellowship at John Stoddard Cancer Research Institute. Vahanian has "extensive experience in clinical trial design and drug development," according to NewLink.

Source: NewLink website, Register archives

State, local assistance for NewLink

In its 15-year history, NewLink Genetics has tapped a state tax credit and a municipal loan.

In 2007, the Iowa Economic Development Authority provided NewLink $414,000 in tax credits. That was given to the company in exchange for creating 45 jobs.

In 2010, the city of Ames awarded a $400,000 forgivable loan. To receive the full amount, NewLink is required to have at least 150 employees in Ames by March 10, 2015. As of Dec. 31, 2013, NewLink had 102 jobs and had received $300,000 of the loan.

Earlier, in 2005, the Economic Development Authority gave NewLink access to a $6 million forgivable loan. However, that contract was terminated, and no funds were disbursed by the state, according to the authority.

The company also reports receiving $8.5 million in grant revenue since its inception.