SAN DIEGO _ One of San Diego's biomedical powerhouses has entered the drug development business in a big way.
Long dedicated to basic science, the Scripps Research Institute is now also testing its own drugs in people, something typically done by for-profit companies.
A Scripps Research affiliate recently started clinical testing of a drug to reverse osteoarthritis by regenerating cartilage. This painful condition commonly occurs with age or injuries that damage cartilage.
If the drug works, it would not only relieve suffering for millions of people, but also ease the financial pain at Scripps Research. The nonprofit has been running annual deficits as high as $20 million in recent years. That poses a challenge to the institute's long-term stability.
Testing began in May by the California Institute for Biomedical Research, or Calibr. Early signs are that the therapy is safe, said Matt Tremblay, chief operating officer of both Calibr and Scripps Research.
Other therapies expected to enter clinical trials next year will treat different forms of cancer.
Calibr was established in 2012 with $90 million from drug giant Merck to speed translating basic science into therapies. While still performing its own science, Calibr has since become Scripps Research's drug development arm.
That is part of the vision of Peter G. Schultz, Scripps Research CEO, who also leads Calibr. If research can be taken into clinical trials, the institute will have more leverage in negotiating deals, Schultz says.
While drug development is extremely risky, just a few major hits could fuel research for years to come, which in turn would generate more successful drugs.
"If I'm successful in putting eight (drugs in the clinic) _ and not all of them but just two (succeed) _ I think that'll be a billion dollars," Schultz said in an October 2016 interview.
This year, Schultz gave himself a timeline, saying his strategy should bring financial security within five years. The drugs now entering clinical testing provide early signs that the approach may be working.
The institute has recently entered into profitable deals with three medical companies through Calibr, Tremblay said. However, the companies required the financial terms be kept confidential.
Presumably, any financial returns from those and other deals will eventually show up when Scripps Research files required financial disclosures.
There's some precedent for what the institute is trying to do. MassBiologics, part of the University of Massachusetts Medical School, has also taken drugs into clinical trials before licensing them. It specializes in vaccines and antibody-based drugs. The difference is that MassBiologics is part of a public university, while TSRI is a private, standalone nonprofit.
The arthritis drug is also a personal issue for Schultz, who has discussed his own struggle with arthritic knees.
Tough and slippery, cartilage cushions the ends of bone, allowing them to glide past each other. However, cartilage doesn't regenerate well. For patients with worn-out joints, alternatives include grafts from cadavers, removal of damaged cartilage, experimental stem cell therapy, and total joint replacement.
None of these alternatives are totally satisfying. Cadaver cartilage is in limited supply, and must be screened for infection. Stem cell therapy yields unreliable results.
And total joint replacements may be infected during implantation, sometimes don't function well and may cause pain. Moreover, they're irreversible. Local philanthropist Denny Sanford has publicly complained about his artificial knee, and praised the result of a stem cell treatment he had in Germany.
Scripps Research's drug could provide a superior alternative by reliably regenerating cartilage without the need for surgery.
The drug, now called KA34, is injected into the knees. In preclinical studies, it caused cells called chondrocytes already present in joints to form new cartilage.
KA34 wasn't the product of an elaborate study of the intricacies of cartilage formation. It emerged from testing huge numbers of chemicals against chondrocytes, and selecting those that promoted regeneration for further study.
There's also competition. For example, another cartilage-regenerating drug is now being tested by Novartis.
Decades ago, Scripps Research gained hundreds of millions of dollars from drug companies through wide-ranging research agreements. If the partner liked anything arising from the research, it had the first right to license it.
Scripps Research actually got into trouble for a deal that was too big. The proposed deal, announced in 1992, would have brought the institute $300 million over 10 years. The money was to be provided by Sandoz, a predecessor to Swiss pharma giant Novartis. In return, Sandoz would have the first right to license any technologies emerging from Scripps Research.
That deal was a big boost from an expiring $116 million deal with Johnson & Johnson. But its all-encompassing scope drew opposition from public officials, such as Bernadine Healy, then director of the National Institutes of Health, and Ron Wyden, then a Democratic congressman from Oregon and now a U.S. senator.
The opposition forced the parties to scale back the transaction. The revised deal gave Scripps $20 million over five years, with an option to renew for another five years. In return, Sandoz got first right to license nearly half of Scripps Research's technology.
While the terms were narrowed, the deal itself followed the same format: In return for promising technology, Sandoz would pay to commercialize it.
That approach, which was used at other research institutions, later fell out of favor because it was too risky for the drug companies. These companies paid millions expecting that research would yield profitable drugs, providing a good return on investment.
