Company
Znomics Inc.
2611 SW 3rd Ave. Suite 200
Portland, OR 97201
Phone: (503) 827-5271
Fax: (503) 228-3290
E-mail: info@znomics.com
www.znomics.com
Contact
Investor Relations
PondelWilkinson
Eileen Rauchberg
Phone: (310) 279-5980
investor@pondel.com
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Share Data
Symbol: (NASDAQ:ZNOM)
52-Week Price Range: $1.80 - 3.25
Shares Outstanding: 11.07 million
Market Cap: $19.93 million
Balance Sheet Data
(as of June 30, 2008)
Total Assets: $2.83 million
Long-Term Debt: $0
Shareholders’ Equity: $2.01 million
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Zebrafish are small striped fish that are widely found in aquariums. But they have a use beyond swimming around in circles in your living room—medical research. When they’re just a few days old, zebrafish are strikingly similar to humans, at least physiologically, making them useful as a testing model. “The most fascinating thing about this fish is that it has about 80% to 90% of the genes found in man,” says Mark Philip, president and chief executive officer of Znomics Inc. (OTCBB: ZNOM), a drug discovery company that exploits the unique attributes of the zebrafish to identify new human therapeutics. The company believes that it will develop a platform to revolutionize drug discovery with the use of this little fish.
Before molecular biology came into its own around 1980, drugs were discovered by taking chemical compounds, putting them into an animal, and observing what happened. People thought that drug discovery was a numbers game, so the more compounds you could test, the more successful discoveries could be made.
So instead of screening hundreds of compounds, now large pharmaceutical companies have millions. But you can’t test millions of compounds in animals. “There was a need to create filters,” says Dr. Bruce Beutel, chief scientific officer of the company, “a way to get from a much higher number of compounds down to the same number you had before and then test those in animals. So scientists started using in vitro biochemical and cellular assays instead of animal models to make the initial discoveries.” But unlike testing in animals, in vitro testing only allows for testing one target at a time, and it often doesn’t predict what a drug will actually do in an animal.
“As a result of all the testing and chemistry done before even a single compound is tested in an animal, drug discovery became a lot less cost-effective in the last 30 years of pharmaceutical research. The industry’s pipelines have become more expensive and less full,” he says.
“The industry is in a conundrum. They spend more and more money working on individual targets with lots and lots of compounds,” he says, adding that in vitro models are flawed because they don’t really model what happens in the body well. “There’s just too much biological complexity in animals for them to be modeled that way. So lo and behold, you get to the end, you still have to test in animals, and the industry has the same success rate that it used to have when it started with many fewer compounds.” But now, of course, it costs so much more.
Zebrafish have benefits beyond their similarities to humans. They’re translucent, so you can actually see what’s going on inside them. They reproduce quickly, allowing for large populations to be efficiently produced. They mature quickly, allowing for tests to begin on fish as young as a few days old. And they’re cheap.
The company believes that it can use the zebrafish to get the benefits of lowering costs and testing more compounds. “We can take the old, proven approach of going straight into animals so that all the targets are in the correct physiological environment, but instead of only testing a few compounds in mice, we can test tens or even hundreds of thousands of compounds in zebrafish,” Beutel says.
“Znomics is really about making this a reality,” Philip says. “At this point, research on the zebrafish has reached a level of maturity, but it hasn’t been merged into the drug discovery process. But it will. And it will significantly reduce the time and money it takes to discover drugs.”
The company stresses that it is not a pharmaceutical company; rather, Philip points out, “the pharmaceutical companies are our customers. They need to get products through the clinic and commercialize them, Znomics doesn’t. We provide them either with access to our platform technology, where we help them figure out how to get more out of what they’ve already invested in, or provide them with novel compounds that we have developed that work in various disease models. Currently, we have compound discovery programs focused in three areas: inflammation, cancer, and obesity.”
Developing its own compounds is the ultimate proof that bigger companies want to see. And the company expects that it will start delivering compounds within the next three years. “Our success won’t be based on clinical success—that’s a probability game,” he says. “We’re supplying the pharmas with much needed products that have an activity in an animal model, both using our systems and their platform as well as supplying the products to them. So our return comes much sooner than the pharmaceutical industry’s, although we will definitely tie some of our long-term success to their market success.”
Management sees its main focus as preclinical drug development, and each of the areas in which it conducts research are billion-dollar markets. “That’s where we have a great advantage,” he says. “Our specialty is in these complex, large diseases that the pharma companies have not been able to decipher.”
Znomics has had talks with several large pharmaceutical companies and the response has been positive. “They like the model. They find it exciting,” Philip says. “Pharmas are having a hard time right now with their blockbusters going off patent. They are still spending a lot on research and development but not seeing any increase in the number of new compounds approved. We intend to change that, by showing them which compounds work in whole organisms (the zebrafish) and stand the best chance of successfully making it to market. The beauty of zebrafish technology is our ability to scale the process to screen thousands of compounds quickly. This in turn gives us the leverage to do all kinds of deals.”
Philip sees its platform changing the paradigm of how drugs are discovered. “I see this remarkable new technology that has not been applied yet in the desperately needed area of drug discovery,” he says. “This is a ground-floor opportunity for the company. We believe, 10 years from now, that zebrafish are going to be as important to the pharmaceutical industry as high-throughput screening and medicinal chemistry are today, and when people look back, they’re going to say that Znomics played a key role in making that happen.”
RISKS:
Znomics has not generated any profits. The company will need to return to the capital markets in order to continue financing its efforts. There is no guarantee that it will be able to raise sufficient funds. Even if it secures financing, profitability is likely years down the road.
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