Start-up Phenomix shows the way forward

Australian biotech start-up Phenomix has closed a $US12 million deal with a first-tier Australian/US venture capital syndicate.

The size of the deal makes it the largest of any Australian biotech start-up financing, according to Dr Julian Northover of Rothschild Bioscience Managers.

Rothschild Bioscience Managers is one of seven in the venture syndicate, which includes one other Australian firm - CM capital - and five US firms: Sofinnova, CMEA, Bay City Capital, Novartis Bioscience and Alta.

Professor Chris Goodnow returned from Stanford University in 1997 to develop a new platform technology,known as "forward mouse genetics", at the John Curtin School of Medical Research in Canberra. As Phenomix's chief scientific officer, Goodnow has been instrumental in building up the company's business team to attract major US investors.

"The Australian/US venture syndicate represents a shift in the way Australian start-up biotechnology companies are being financed," Northover said. "Start-ups are looking for broad syndicates from day one, allowing them to get on with their research and development without having to look for more investors.

"A purely Australian venture syndicate could not have provided the level of investment that Phenomix was looking for ? they needed global backing," he said. Platform technology-based biotechs can burn through up to $US70 million in three years.

Phenomix has a new approach to biomedical drug target discovery. Traditionally, a novel disease target is identified which then has to be validated in a mouse model. The forward genetics approach gives novel disease targets along with a corresponding mouse model. "It circumvents a major bottleneck in drug development," Northover said.

Forward genetics is a multi-step process. Genetic mutations are randomly induced in mouse embryos. The mutant mice are bred and physiologically screened to detect any phenotypic abnormalities that may relate to diseases such as asthma, diabetes, Alzheimer's or cancer. When a clinically interesting mutant strain is discovered, microarray gene chip technology is used to identify the genetic mutation.

More than 150 mutant strains of mice have been identified with a variety of disease-related phenotypes ? enormously valuable models for pharmaceutical companies. "Many pharmaceutical companies are looking for novel drug targets but the problem is they are not validated in any animal model," Northover said.

"What differentiates Phenomix is they are presenting the pharmaceutical industry with a drug target that is validated in a model mouse."

Phenomix incorporates two teams in forward mouse genetics. The pioneering work, in mouse mutagenesis, is carried out in Canberra at the John Curtin School, and the microarray gene chip technology is performed at the Genomics Institute of the Novartis Research Foundation in San Diego.

Phenomix's chief operating officer, Dr Keats Nelms, said the company currently had 20 employees, but would grow to 80. "Multinational pharmaceutical companies are very keen to use our platform technology," he said. "We plan to license out the technology and we will have our own internal program to develop our own therapeutics."

The science does have strong Australian backing. The Federal government 's Innovation Investment Funds (IIF) provided substantial finance for Phenomix. Both CM Capital and Rothschild Bioscience Management Fund have a licence to operate an IIF. The ACT government has recently funded a new mouse vivarium for Phenomix and others, and ANU's existing mouse facility has over 30,000 mice with documented family trees.