Bizjournals -- The owners of Protez Pharmaceuticals won’t be getting the full $400 million payday they hoped for when the Malvern company was bought by Novartis in 2008.
Novartis, a Swiss pharmaceutical company with U.S. offices in North Jersey, has shelved PZ-601, the experimental antibiotic it acquired in the Protez deal, and closed the Malvern offices that had served as Protez’s headquarters.
Protez, which had 16 employees, operated as a stand-alone subsidiary of Novartis.
Three former Protez executives have already started a local life sciences company called VenatoRx Pharmaceuticals, which is working on antibacterial compounds to treat infections.
VenatoRx in late July was awarded a three-year, multimillion-dollar grant from the National Institutes of Health to support the company’s proposal for the treatment of food- and water-borne infections.
Christopher J. Burns, one of the VenatoRx’s co-founders, was vice president of research at Protez.
Burns said Novartis informed the Protez staff in April that it would be winding down operations at Malvern.
Sarah Kestenbaum, a Novartis spokeswoman, said the 16 Protez employees were provided with either a severance package or the opportunity to apply for open positions at other Novartis locations.
“If the [PZ-601] compound had not gone down, I believe we would have continued operations here in Malvern,” Burns said. “But at the end of the day, I don’t think anybody at Protez thought they were going to retire at what was a tiny subsidiary. We had a very good relationship with Novartis and we enjoyed working with them. They were an excellent partner.”
Officials at Novartis said the company discontinued the development of PZ-601 this year after observing a “high rate of adverse events” in testing of the drug for patients with skin infections.
The compound was intended to treat hospital- and community-acquired infections caused by multiple types of bacteria. It was designed to bind to bacteria, disrupt the ability of the bacteria to form new cell membranes, then kill the bacteria.
The decision to stop the experimental drug’s development resulted in Novartis taking a pre-tax charge of $152 million.
Burns, who is president and chief scientific officer of VenatoRx, co-founded the company with Luigi Xerri, who is serving as chief development officer and vice president of business development; and Daniel C. Pevear, who is senior director of biology and grants development.
At Protez, Xerri was a co-founder and chief scientific officer and Pevear was director of biology.
Burns said the trio started preparing to “split out on their own” after the Novartis announcement in April.
“From that day on we began planning to start another entity in the antibacterial space where we believe we are strong,” he said.
The company, which has operated as a virtual enterprise since June, will be joined in October by a former officer manager and three “key scientists” from Protez.
Burns said next month the company, thanks in large part to the NIH grant, plans to move into office and lab space and bring in an additional two doctorate-level researchers with strong chemistry backgrounds. The amount of the NIH grant was not disclosed.
“Private money is very tight right now,” he said. “Funding from the NIH is critical not just for us but for anybody with a good idea these days. [The grant] is enough for us to create jobs, create science and create good value for our company.”
Protez, founded in 2003, received early initial backing from a host of local organizations. BioAdvance, which operates the state-supported Biotechnology Greenhouse of Southeastern Pennsylvania, invested $450,000 in Protez in 2004 and another $200,000 the following year. Ben Franklin Technology Partners invested $300,000 in the company in 2004.
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