StreetTalk: PMPs: Easy as 1-2-3?

Companies that create new products often discover that the largest market for said products was not the market the "experts" thought it would be.

Take Alfred Nobel. When the fabled scientist was in the process of developing dynamite, he was trying to discover a better explosive device for the US military. As it turned out, dynamite proved to be too explosive for even the armed forces. The big guns in Washington decided that dynamite was too unpredictable and too dangerous for soldiers to be carting around.

Brian O'Connell

Chagrined, Nobel wasn't sure where to turn when representatives from the mining, railroad, and construction industries contacted him. Waving checkbooks at Nobel, it was clear that they immediately saw the productivity potential for dynamite in their respective fields of work. Hello, rock-busting explosive device. Good-bye, pick and shovel.

So it goes with the biopharmaceutical industry and one of its promising, if nascent, technologies — plant-made pharmaceuticals (PMPs).

A $20 BILLION MARKET

What are PMPs, and why should Wall Street types get to know them? According to a white paper on the topic released by BIO, PMPs use biotechnology-fueled plants to produce uber-proteins that might be used by doctors to battle life-threatening illnesses. According to the BIO paper, "in this process, plants themselves become 'factories' that manufacture therapeutic proteins. These proteins are then extracted, refined and used in pharmaceutical production."

A $20 billion market, PMP tools and technologies are very much a work in progress, with most projects in either the field trial or clinical trial stages, according to SeedWorld magazine, which covers the latest advances in plant breeding and development, biotechnology, marketing, testing, and international trade. According to BIO, the United States Department of Agriculture reports that only 20 permits were issued to conduct PMP trials in 2002, and only nine more in 2003. To date, only a handful of farming-friendly states (Arizona, California, Florida, Iowa, Texas, and Nebraska among them) have been issued permits to conduct PMP trials by the USDA. According to BIO, "it is estimated that it will be at least three to five years before full commercialization of the first PMP is reached. Plant-made pharmaceuticals are strictly regulated by United States regulatory agencies and differ from traditional commodity agriculture on many fronts."

I won't bore you with my limited knowledge of the scientific side of PMPs — in other words, how PMPS are produced, what kinds of plants are used, and the ins and outs of the harvesting process (there's more than enough good information on that elsewhere in this issue of BioPharm International). Suffice it to say that the idea of pharmaceutical plants becoming quasi agri-factories where therapeutic proteins can be produced faster, easier, and cheaper has a great deal of potential to investors.

TAKING A SWING AT PMPS

Contrast the potential of PMPs with conventional production methods, and you begin to see why the technology could save substantial amounts of time and money, enable easily scaleable production, and produce complex proteins that current systems cannot produce. What also interests me — and hopefully the readers of this column — is the kinds of diseases that potentially can be treated with the technology. After all, it's the "trigger effect" of treating such diseases that will demonstrate the technology's potential to generate fat profits and reward shareholders that pour money into a technology that may or may not pay off.

So far, a growing number of industry heavy-hitters have lined up to take a swing at PMPs. ProdiGene, in partnership with NIH, is working on a corn-based treatment for travelers' disease. Large Scale Biology Corporation is doing the same with tobacco-based products in an effort to fight non-Hodgkins lymphoma. Meristem Therapeutics also is using corn to research ways to successfully battle cystic fibrosis. Ventria Bioscience is analyzing how rice can help treat iron deficiency and even diarrhea.

Okay, so using plants to treat diseases isn't exactly a bombshell (even though Wall Street types like to bet on bombshells). Years ago, European, Egyptian, and Far Eastern doctors were crunching up plants to make medicines like aspirin and quinine. Unfortunately, aspirin and quinine don't cut it anymore.

PMPs are changing the biopharmaceutical industry by knocking down production costs and speeding time-to-market. New agricultural technologies, the renewable nature of plants, and increasingly sophisticated plant-processing techniques allow PMPs to be grown and nurtured in vast abundance for R&D. The time and money saved on plant production allows further R&D investment, giving consumers a faster turnaround on viable medical treatments — and investors a bigger bang for their buck.

THE IMMUNEX MODEL

Kent Iverson, a biopharmaceutical industry consultant, cites Immunex and its Embrel arthritis drug as a good example of a firm that could have leveraged the power of PMPs to bring products to market faster and cheaper. Immunex faced continued shortages of the popular drug after it was released in 1998. The problem? The drug was manufactured in huge 10,000-liter tanks that were extremely expensive to build and maintain. "Immunex didn't have the money to build a large enough scale facility to manufacture Enbrel in large enough quantities. This is where transgenic plants could have a huge advantage. If Enbrel were produced in corn, they could have just planted more acres, which would have been much less expensive than building new, larger facilities," Iverson said.

Hence Wall Street investors' attraction to a technology that promises to cut drug production costs and speed up delivery times. After all, PMPs solve a vexing problem for the drug industry: Since most biopharmaceutical companies cannot afford to risk a $500 million investment in an R&D facility for a drug that may or may not be green lighted by Uncle Sam, why not use relatively inexpensive plants to fuel protein research and save drug companies tens of millions of dollars in the process? If PMPs can follow through on their promise to use plants to make drugs available faster and in larger volume than ever before, who wouldn't want to bet a shekel or two on their commercial viability?

Like any other financial venture, investing in PMPs requires both the patience of a saint and the ability to absorb some bad news and still hang in there. "The agriculture biotech industry and investors must understand that product commercialization costs associated with bringing new materials or medicine to market are extreme, ranking biotechnology capital requirements among the highest of any sector in the United States," Tom Steen, managing partner for the Des Moines, Iowa-based Cybus Capital Markets, wrote in a recent analytical report on the topic. "The investor who is placing capital in this sector needs patience and sufficient knowledge of the core biotechnology to understand the regulatory and development hurdles unique to this industry."

Like Nobel's experiment with dynamite, there's no sure footing on PMPs. Few seem exactly sure where the trail will lead. But if you like a mix of promising technologies and ground-floor stock market opportunities, plant-made pharmaceuticals might just be your field of dreams.