PanGenetics CEO Kevin Johnson has stepped down to rejoin Index Ventures as a full-time partner on its life sciences team, where he will attempt to "clone" that biotech's asset-centric model.

PanGenetics made headlines when in late 2009 it licensed a clinical-stage anti-nerve growth factor (NGF) antibody to Abbott Laboratories for a staggering $170 million up-front, which would rank as the largest up-front for a Phase I asset were the transaction actually a licensing deal. Instead, it was an acquisition that revealed PanGenetics' intriguing corporate structure: each asset was organized as its own company ( Also see "PanGenetics' NGF Antibody Sale Illustrates Index's Asset-Focused Strategy" - Scrip, 1 December, 2009. ).

After Abbott acquired the NGF program, thereby securing a solid exit for Index and PanGenetics' other investors, the biotech continued working on a second project that targeted the antigen CD40. None of the Abbott cash financed the CD40 program development.

It's a strategy Johnson hopes to tweak and repeat at Index as an investor, not as a CEO. "What excites me is the prospect of cloning the PanGenetics model but with a proviso that I don't go in as CEO this time," he said in an interview. "I want to find interesting molecules, assemble teams around them, and do whatever's necessary to develop [the assets] to proof of concept or proof of mechanism. That's the default setting for our model."

Johnson was an early employee of the antibody pioneer Cambridge Antibody Technology, serving on that company's board and as its research director and chief technology officer. He joined Index as a venture advisor in 2004 and became CEO of PanGenetics in 2005.

PanGenetics Winding Down

Johnson's departure from PanGenetics is a clear signal the biotech has run its course. Current CFO Geoff Race has taken the reins as interim CEO, said Johnson, and is examining the options for the company's remaining assets.

PG102, the anti-CD40 project, began a Phase I single ascending-dose safety study in psoriatic arthritis patients in the fourth quarter of 2008. The trial was expected to read out in the first half of 2010, but PanGenetics decided to halt the study.

Johnson told "The Pink Sheet" DAILY that the study "was taking forever to recruit" because of a stringent design that erred on the side of detecting potential cardiovascular safety risks. The drop-out rate far exceeded "what we had expected from previously published figures," said Johnson. The company will spend no more on PG102 or its earlier stage research projects. It has yet to return the rest of its cash to shareholders.

A Better Mousetrap

Regardless of the fate of PG102, PanGenetics' investors can consider the firm a success, thanks to the NGF deal with Abbott. The timing of that tie-up was certainly fortuitous, as Pfizer's June 2010 setback with its own anti-NGF antibody has called into question the once-promising mechanism of action in difficult-to-treat chronic pain settings (Also see "Future Appears Grim For Pfizer's Tanezumab With Ostearthritis Trial Stopped" - Pink Sheet, 24 June, 2010.).

That won't stop Johnson and Index from trying to improve on the asset-centric model. "PanGenetics was a bit of a hybrid, housing two separate programs managed by the same people," he said. "I don't think we'd do that again. Structurally it's easier to stick with one-asset, one-company. We didn't get everything right on the first run."

Specifically, the investors now feel they have a better handle on the kinds of operational expertise needed to run an asset-focused biotech, as well as the amount of oversight needed to sufficiently monitor the third-party providers necessary for these kinds of companies to function. "You almost have to have somebody in the lab alongside the people doing work on your behalf," he said. "You have to be completely on top of it."

Most important, perhaps, is finding a manager who is expert in the science behind the company's asset, said Johnson. "You need a CEO who is a CSO type. The company needs to be engineered to take on the due diligence further down the line. The intensity of the due diligence that pharma and big biotech do has become extreme, they look at absolutely everything."

Chris Morrison (c.morrison@elsevier.com)

PanGenetics "Experiment" Winding Down, CEO Kevin Johnson to Pursue Asset-Centric Model at Index Ventures

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