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A biotech lab

The people at Genentech have created an enduring perception about antibodies, which says these Y-shaped protein drugs are really good at specifically targeting cancer cells. When I was at Bloomberg News a few years ago, I learned that investors paid close attention to multi-billion dollar sales trends of the big three antibody drugs for cancer—bevacizumab (Avastin), trastuzumab (Herceptin), and rituximab (Rituxan)—and not much else at biotech’s standard-bearing company.

But as any antibody drug developer will tell you, antibodies can be used for a lot more than just targeting cancer cells. Just down the hill from Antibodies ‘R Us in South San Francisco is KaloBios, a venture-backed company with a vision of making antibodies that can specifically interfere with a deadly bacterium found in the lungs of people with cystic fibrosis, and in patients on ventilators who get infections while they’re in hospital intensive care units.

KaloBios, which draws its name from the Greek expression for “good life,” is hot on the trail of an antibody drug for pseudomonas bacterial infections. The company, founded in 2002, has settled on this direction with its lead compound after raising four rounds of venture capital worth a combined $80 million. This 50-person company has a lot of interested parties watching how it does—with a roster of backers that includes MPM Capital, Sofinnova Ventures, Alloy Ventures, GBS Venture Partners, Mitsubishi UFJ Capital, Genzyme Ventures, Baxter International, and the Development Bank of Japan. If KaloBios plays its card right, CEO David Pritchard says, it should be able to build a business worth more than $1 billion within the next three to four years.

“There aren’t very many good names left out there in antibodies that haven’t already been acquired,” Pritchard says.

The antibody drug market was expected to generate $30 billion in worldwide sales in 2009, with an annual growth rate of 14 percent through 2012, according to Datamonitor. Some of the biggest drugs in this category have led to some of biotech’s biggest takeovers of recent years—like Roche’s purchase of Genentech, Eli Lilly’s takeover of ImClone Systems, AstraZeneca’s deal for MedImmune, Amgen’s buy of Abgenix, and Bristol-Myers Squibb’s acquisition of Medarex.

KaloBios sees itself following the industry trend over time, gradually building value to become more like the remaining top-tier antibody companies that are still independent—Cheshire, CT-based Alexion Pharmaceuticals (NASDAQ: ALXN), Tarrytown, NY-based Regeneron Pharmaceuticals (NASDAQ: REGN), and Seattle Genetics (NASDAQ: SGEN).

What KaloBios has that’s different is a platform technology for making antibodies, as well as some different ideas on how to apply them for medicine. The main scientific idea is to pump out antibody candidates with what it calls “Humaneering” technology. The technology is supposed to make antibodies that are super-specifically focused on the target and nothing else; bind tightly with the target on the cell of interest and don’t let go; and avoid provoking an immune system reaction that essentially can render the drug useless.

KaloBios, to be sure, isn’t the only company out there with what it thinks is a better way to discover and produce antibody drug candidates—San Francisco-based Ablexis, Bothell, WA-based Alder Biopharmaceuticals, and Lebanon, NH-based Adimab are just a few companies we’ve covered at Xconomy that are taking creative approaches that seek to solve some of the traditional limitations of antibodies.

So Pritchard spent most of his time talking about product candidates, not the gee-whiz anything-is-possible-now nature of the technology platform. The lead drug candidate is KB001. This drug made the news last January during the JP Morgan Healthcare Conference, when KaloBios said it secured $35 million in upfront cash from Paris-based drug giant Sanofi-Aventis to co-develop the treatment.

The co-development agreement was structured as as a classic Big Pharma deal, where the bigger company takes responsibility for the broadest application of the drug, while the biotech keeps the rights to the orphan disease use. In this case, Sanofi gets the right to develop KB001 for infections people get in the hospital while they are on ventilators, and KaloBios will focus on developing the treatment for patients with cystic fibrosis and bronchiectasis. Something like 500,000 people a year are thought to get dangerous pseudomonas infections in hospitals each year, meaning that a big company like Sanofi is best suited to take on that market, while about 30,000 patients in the U.S. have cystic fibrosis, making that a niche indication suitable for a little biotech like KaloBios, Pritchard says.

The idea of using an antibody against pseudomonas infections is where things get really interesting. Cystic fibrosis is caused by a single missing or faulty gene that causes buildup of thick, sticky mucus in the lungs. That mucus becomes a haven for pseudomonas bacteria. Pseudomonas then causes havoc partly by puncturing and killing critical immune defense cells known as neutrophils. The body’s immune system tries to fight off the pseudomonas, but it’s a tug-of-war that over time leads to excess inflammation, scarring of the lungs and, ultimately, suffocation.

“It’s the war between the immune system and pseudomonas that kills you,” Pritchard says.

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