What went wrong at Protemix?

Biotechnology is often lauded as one of New Zealand’s great hopes for the future of our economy. But the trouble with biotech is the cost of getting to market, more often than not seen as prohibitive for New Zealand investors and our tiny capital markets.

Protemix was meant to change that. The biotech company, spawned from University of Auckland research, was publicly praised, supported by government grants and heralded as a poster child for the government’s knowledge economy push. Its rise to fame attracted some of the biggest names in New Zealand business. It seemed for a while as if this New Zealand biotech baby could make it all the way and then, well, nothing. Mainstream media coverage dried up and little was heard of the company again.

So what went wrong?

By all accounts (and there are lots of accounts) the science is sound. Some blame the way the company’s last clinical trial was designed, others the alleged poor management of investors’ money.

Larry Ellingson, the company’s former chairman, says Protemix’s demise is “a big shame”. Not just for all the investors involved, but for New Zealand and the many millions of diabetics who could have benefited from the company’s drugs. “We’ve had good people designing and monitoring trials in big companies, and they screw up. It happens. That doesn’t mean you should quit and give up on it.”

Ellingson, a former director of pharmaceutical giant Eli Lilly, and his American-based colleagues Alan Cherrington and Alison Pilgrim resigned from Protemix’s board in March 2009, having been unpaid for nearly three years. All that remains of the company is Bill Birnie, the New Zealand-based former Fay Richwhite director, who raised the $53.5 million for Protemix’s development, and Protemix’s largest single shareholder.

Birnie says he hasn’t given up on Protemix. But he admits he made mistakes — not raising enough capital in later financing rounds and not keeping shareholders adequately informed particularly after the company’s last clinical trial. “There are so many lessons. But this story might still have a happy-ish ending.”

Government ministers don’t often send out press releases publicly congratulating New Zealand companies, but in February 2005, then minister for industry and regional development Jim Anderton did exactly that.

Protemix was publicly lauded for the appointment of a new American chief executive, Larry Ellingson. “The flow-on effects to the New Zealand economy from these successes will be significant as New Zealand’s biotechnology industry as a whole gains international credibility and critical mass,” said Anderton in the release.

The government had been a Protemix supporter from the beginning, injecting about $15 million into the ground-breaking diabetes drug development work of Professor Garth Cooper and Associate Professor John Baker at the University of Auckland; work that led them to co-found Protemix in 1999.

The Labour-Progressive government also underwrote $2 million of grants for Protemix in 2003, demonstrating its support for the fledgling company during its first major capital raising, and helping to hook more than $24.5 million worth of capital from some of the biggest names in New Zealand business. An investors’ memorandum at the time declared that Cooper and Baker’s revolutionary new diabetes drug Laszarin, “has the potential to exceed annual sales of US$1.2 billion after five years”.

Protemix’s lead drug candidate PX811019, or Laszarin, gained fast-track status from the all-important US Food and Drug Administration (FDA). Fast-track status pegged the drug as a standout for serious or life-threatening conditions and ensured the FDA would expedite its approval. The status also validated Cooper and Baker’s earlier work showing Laszarin — named after the Biblical Lazarus, whom Jesus is said to have raised from the dead — appeared to effectively treat diabetic heart failure, repairing hitherto irreparably damaged and swollen hearts.

There are nearly 200 million diabetics worldwide and two-thirds are expected to die from heart disease or stroke. So Laszarin’s potential market was huge. It also had a history of safety and efficacy as it was based on Trientine, used for years to reduce excess copper in patients.

Protemix embarked on a further clinical trial to check efficacy and dosage and to attract the many millions of dollars it needed for the final mortality and morbidity phase III trial — typically between 2000 and 4000 patients and costs upwards of $50 million — to ensure the drug’s safety.

Towards the end of 2006 it became clear the 90-patient phase IIb trial was not going to be the success expected.
“The trial came back negative. It didn’t hit its end points,” says Cherrington, Professor of medicine at Vanderbilt University and a former president of the American Diabetes Association. “But I guess if the question was ‘did the drug funk?’, then my answer would be different.”

Cooper didn’t want to be drawn on the reasons for the trial’s failure, saying only he didn’t accept the former board’s assessment of the trial, or any management assessment. Instead he fires off an email showing how all other trials and preclinical work on Laszarin have been peer-reviewed and published by top scientific publications, proving the science is sound. “I’m not convinced the trial was negative,” he says.

Ellingson, a past chairman of the American Diabetes Association, blames the trial’s failure on a lack of FDA experience by the New Zealand and Australian clinicians who ran the trial. Patient enrolment took far too long and far too few were enrolled, giving no margin for error, he says. If a trial doesn’t meet the FDA-agreed number of suitable patients, it fails, regardless of whether patients benefited or not.

“Long story short, had all the patients met the criteria, their classification for heart failure, diabetes and so on, the trial would have been good … and quite frankly overseeing that requirement was part of the issue.” Had the trial been done in the US, it would probably have been a success, he says.

Baker admits patient recruitment was a problem. Baker was Protemix’s chief medical officer at the beginning of the trial before being tempted back to the frontline at Middlemore Hospital. The company also sought feedback from the US before beginning the trial, but didn’t get any, he says. The trial was conceived before Ellingson and Cherrington were on board.