By Peter Loftus
AMES, Iowa--This state leads the nation in hogs and corn, not
biotechnology drugs.
But one small firm here is drawing notice for its cutting-edge
research on Ebola and cancer, despite being far removed from the
drug industry's usual hubs.
NewLink Genetics Corp. has recruited scientists from around the
world to work in laboratories nestled between Iowa State University
and crop fields. The company's biggest shareholder is a large
soybean company owned by Iowa's sole billionaire.
NewLink stands out at a time when the drug industry increasingly
is congregating around hubs such as Boston and San Francisco. The
company's success so far, including the signing of lucrative
research partnerships last year with Roche Holding AG and Merck
& Co., suggests drug R&D can still thrive outside of these
urban clusters.
"The Midwest has spawned many great, innovative companies," says
NewLink's co-founder and CEO, Charles Link, pointing to Minnesota's
medical-device makers and Indianapolis drug company Eli Lilly &
Co. "I think sometimes my friends and colleagues from the coasts
underestimate the potential of the Midwest."
But as NewLink grows, it may face a crossroads: Can the company
hang onto its Midwestern roots while still attracting talent, or
will it ultimately need to make a change? Already, the 130-employee
company is investing in locations far away from its core.
Last year it leased space in Austin, Texas, because that city
has better flight connections and is more appealing to sales
workers. NewLink also opened a small satellite office near Boston
for Ebola research. Dr. Link acknowledges the Ames headquarters may
not appeal to every job prospect, and says the newer locations
could serve as alternatives for new hires if the firm continues to
grow.
"Building an early-stage biotech company is a really hard
thing," says Peter Barrett, a partner with venture-capital firm
Atlas Ventures in Cambridge, Mass. "Trying to get very specialized
people in a remote area may be very difficult."
Dr. Link, 55 years old, says he wanted a Midwestern upbringing
for his children when he moved to Iowa in the 1990s. A former
National Cancer Institute oncologist in Bethesda, Md., he relocated
to work for Iowa Methodist Medical Center in Des Moines, where he
led research into cancer treatment, including a cutting-edge
approach called immunotherapy, which harnesses the immune system to
fight cancer.
In 1999, he started NewLink by spinning out some of the
immunotherapy technology from the hospital, which will receive
royalties on sales of any resulting products.
For help with the startup, Dr. Link called an old colleague from
the National Cancer Institute's Maryland campus, Nicholas Vahanian,
who initially rejected the idea of moving to Iowa. A native of
Turkey, Dr. Vahanian says he didn't think Iowa was "where the
action was." But he changed his mind after visiting, and agreed to
cofound the company and serve as its president and chief medical
officer.
NewLink recruited other scientists from NCI and elsewhere in the
U.S., and from as far away as China and Russia. It also tapped a
local institution for chemistry graduates: Iowa State, which
dominates Ames.
NewLink was and remains one of few biotechs in town, though Iowa
State's strong veterinary program makes Ames a hub for animal
research. The town is home to an animal-health division of
Germany's Boehringer Ingelheim and the U.S. Department of
Agriculture's National Animal Disease Center. The Ames Laboratory
is part of the Department of Energy and is on the ISU campus; it
specializes in materials science, among other things.
During a tour of NewLink's labs, Gary Potter, vice president of
manufacturing and supply chain, pointed out the window to a new
Boehringer Ingelheim animal-health R&D site under construction.
"Up until a couple of months ago, that was a cornfield," said Mr.
Potter, who used to work for the biotech Abgenix in California.
Dr. Link raised cash for NewLink from investors including
soybean billionaire Harry Stine, whose Stine Seed Farm Inc. owns
about 25% of NewLink shares.
Based in Adel, about 50 miles southwest of Ames, Mr. Stine's
seed empire was built partly by licensing proprietary seed genetics
to other companies. He sent scientists to Ames so that they could
vet NewLink, and then agreed to invest because he wanted to support
anticancer efforts, says Dr. Link. Forbes has estimated Mr. Stine's
net worth at more than $3 billion. A spokesman for Stine Seed
declined to comment on New Link.
NewLink's focus on one of the hottest areas of cancer
treatment--immunotherapy--has attracted interest from one of the
industry's most respected R&D shops: Roche Holding AG's
Genentech unit.
A team of Genentech scouts flew to Ames from their bayside
headquarters near San Francisco last year to visit NewLink. The
Genentech group included Bruce Roth, one of the company's heads of
drug discovery. Dr. Roth is known for inventing the blockbuster
cholesterol drug Lipitor at a predecessor company to Pfizer
Inc.
Dr. Roth says he was eager to visit Ames because he earned his
Ph.D. in organic chemistry from Iowa State more than three decades
ago. In October Genentech agreed to pay $150 million to co-develop
and potentially market an experimental NewLink cancer immunotherapy
in early-stage testing for breast cancer and other tumors.
Genentech may make additional payments of more than $1 billion if
drugs from the collaboration reach the market.
What started as a side project at NewLink drew more big-pharma
attention last year: Ebola vaccine research. In 2010, NewLink
licensed an experimental Ebola vaccine from the Public Health
Agency of Canada.
As last year's Ebola outbreak in West Africa worsened, NewLink
contacted Merck for assistance in putting the vaccine in vials.
This led to Merck's agreement in November to pay $30 million to
license the vaccine, one of two the U.S. government is now testing
in a large clinical trial in West Africa. The study's start in
February triggered an additional $20 million Merck payment to
NewLink, which will also receive sales royalties if the vaccine
makes it to market.
NewLink went public in 2011. Income from the deals with Merck
and Genentech helped the firm turn its first profit last year,
though it still has no products on the market. Its lead drug in
development--which isn't part of the Merck or Genentech
partnerships--is an immunotherapy for pancreatic cancer that is in
late-stage testing. The company plans to double its workforce in
the next year, including adding jobs in Austin.
The company has a market capitalization of about $1.57 billion.
The stock had a big drop last year after a clinical trial of the
company's experimental pancreatic-cancer drug didn't meet the
threshold for an early halt, but the stock has since regained its
losses and the trial continues.
Dr. Link says he's heard the skepticism about NewLink's
location. A lawyer representing Bay Area venture-capital firms once
likened the firm to the solitary cliff-side branch that Wile E.
Coyote clung to in the old Road Runner cartoons. "That little
branch is your company," Dr. Link recalls the lawyer saying.
"You're out in the middle of nowhere."
Write to Peter Loftus at peter.loftus@wsj.com
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