Agouron Pharmaceuticals, a tiny San Diego-based company that garnered $6.5 million in its recent initial public offering, owes its existence to the fact that major pharmaceutical companies must spend an average of $125 million to discover a single new, usable drug.
Industry analysts believe Agouron's blend of X-ray crystallography, medicinal chemistry, molecular engineering and computer modeling will help the company trim drug development costs by giving its researchers the power to "design" new drugs rather than to "discover" them.
That is an important edge because "serendipity still plays a large role in the discovery of new drugs, just as it did 15 years ago," according to Jim Snyder, section head of drug design for G.D. Searle, a Chicago-based subsidiary of St. Louis-based Monsanto.
Relying upon chance discoveries is an inherently expensive process, according to the Washington, D.C.-based Pharmaceutical Manufacturers Assn., which last week released a survey which pegged the cost of discovering a new drug at $125 million.
"Conventional drug discovery is analogous to trying thousands of keys in a sophisticated padlock in search of one which fits correctly and opens the lock," according to Irving Katz, director of market research for San Diego Securities, which underwrote for Agouron's public offering.
Agouron's blend of technology eventually will let researchers design and synthesize a possible drug molecule and "then examine the structural fit of the molecule when it is inserted into the (lock)," Katz said.
Agouron has concentrated its research on a handful of therapeutic drugs, including anti-viral and cancer drugs. Those drugs historically have proved difficult to discover, but Agouron expects it will be able to "engineer drugs that act with planned precision on specific molecular targets in the body," according to Johnson.
To create a drug, however, Agouron first must understand the essence of target molecules, Johnson said, adding that in past, the discovery process has taken as long as eight years.
With its $500,000 state-of-the-art X-ray device and its newer, more powerful computers, Agouron hopes to shrink that discovery process to about two years, Johnson said.
After Agouron researchers create a computer model of the target molecule, scientists will try to design a "key" to fit into the biological "lock," Johnson said. Agouron's medicinal chemists would subsequently manufacture the drug.
"The more exactly the drug's three-dimensional shape fits the target, the more effective and free of side effects the drug is likely to prove," Johnson said.
Searle and other large pharmaceutical companies are using similar "computational programs" to narrow their search for new drugs, according to Snyder. However, those larger drug companies still rely heavily upon serendipity to find new compounds, Snyder said.
Agouron believes that its methods will "significantly shorten drug development time and yield more predictable results than screening or chance discovery," Johnson said.
Not surprisingly, the major drug companies all boast extensive research and development budgets.
But "what makes Agouron unique is that few companies can boast so many top-notch people," said Stelios Papadopoulos, a New York-based vice president with Paine Webber who specializes in biotechnology. "And, Agouron approaches the problem with an integrated, comprehensive approach."
Burroughs Wellcome, Warner Lambert and G.D. Searle, among others, are using similar technology to narrow the potential field of possible drug compounds. "That's the way the industry is moving," Snyder said.
Today, Agouron is a "small, unknown company whose main source of revenue is research contracts," said Papadopoulos, who does not expect Agouron to generate significant product sales for at least five years.
"It's clearly a long-term undertaking, but it looks square in face of the next generation of pharmaceutical products," Papadopoulos predicted.
Agouron reported a $773,100 net loss and revenue of $536,000 for the fiscal year ended June 30. It reported a $162,000 net loss and revenue of $322,300 during fiscal 1985.
Oddly enough, the bulk of the tiny pharmaceutical company's revenue doesn't deal with pharmaceutical research.
Instead, General Foods, the packaged food giant, has awarded Agouron a grant to develop a food additive to modify and stabilize the texture of what a General Foods spokesman described as "an important class of food products."
Agouron ventured into food products instead of pharmaceuticals "because it's only mankind that distinguishes between food proteins and drug proteins," according to Agouron President Peter Johnson.
Picked to Head Group
Agouron recently was selected to head a research consortium that will use a $4.3 million research grant from the National Institutes of Health to investigate the design of drugs targeted against the AIDS virus. That research is "very preliminary," Johnson said.
The NIH grant is targeted against AIDS, but technology developed under the grant will "make Agouron an attractive partner for a major pharmaceutical company with a desire to access anti-viral drug design technology," Katz said. That technology will help Agouron "negotiate increasingly attractive corporate partnerships based on the prestige and technology developments associated with the NIH grant," Katz said.