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At Maxygen, just as this “seed, select, and amplify model” was the antithesis of rational drug design, the company’s predilection for “sense and respond, learn, and adapt,” was the antithesis of traditional business planning.
While the company’s recombinant technology was admired, its disavowal of “rational” management was not universally appreciated. For the first three years, “we had no formal regular senior management meetings,” Simba Gill, then Mayxgen’s president, told us. Planning was done on the fly, with executives running around like “madmen” or “headless chickens.”
More conservative board members wanted Maxygen to focus on pharmaceuticals. Instead, Howard and his colleagues continued to invest in their gene-shuffling program, spawning four very different opportunities. They probed each, and let natural selection determine the strategy. As Gill explains the approach, it was, “Tell us what you’d like to do with shuffling.” Howard describes this phase of Maxygen’s life as being like “an amorphous amoeba that has multiple pseudopods moving up different gradients, with a pseudopod out in the direction of agricultural products, another out toward chemical products, another toward protein pharmaceuticals, and another toward vaccines….” Or, as Gill explains, “We let the environment drive the initial focus.”
Founder Pem Stemmer told us that his board never thought that agriculture could be a promising area, and yet “it was two $100-million deals in agriculture [one with Pioneer/Dupont, another with Syngenta] that allowed us to go public.” This was followed by another serendipitous deal in industrial enzymes with Novozymes.
The first phase of Maxygen’s life led to 30 corporate partnerships, $35 million in government grants, publications in top-tier journals, and numerous patents that would generate royalties for years to come. The strength of that platform was recognized by a 2007 article in the Wall Street Journal, ranking Maxygen in the top 10 of all global biotechs for the impact of its intellectual property. But then Stemmer added, “There comes a point when that cell is going to divide.”
The second stage in Maxygen’s life cycle began with deciding “the area in which we wanted to be excellent—biosuperior proteins.” Differentiation led to “cell division” in the form of spin-offs, and it was here than Maxygen’s technology innovation allowed it to capture value for its shareholders. Codexis, the first of Maxygen’s progeny, emerged as a leader in the business of providing hard to produce, expensive molecules, compiled on demand. Maxygen retained 31 percent of Codexis and a liquidity event would provide about $40 million to Maxygen’s owners.
Maxygen sold Verdia, an agricultural spin-off, to Dupont for $64 million in cash. It also spun off Avidia, a company with a new protein technology, which was recently purchased by Amgen, infusing another $18 million into the mother company. Maxygen DNA continues in each of these cultures, and the conserved energy—in the form of cash—nurtures the main stem. Each of these past and expected liquidity events creates non-dilutive financing for Maxygen. Investors are earning their return on Maxygen’s technology development by maintaining their share of the increased potential of the parent company.
Which brings us to the third phase, which is where we find Maxygen today—working on clinical development of protein drugs, which requires a very different skill set and a very different way of balancing risk and opportunity. “We’re no longer at the stage of “wouldn’t it be interesting if?” says Howard.
A distinguishing characteristic of Maxygen’s first, most generative stage, was the diversity of the management team: a Uruguayan financier, a Dutch founder, a CEO from Australia, and a president born in South Africa of Indian parents. As Maxygen has become more focused, the expertise of the people at the top has narrowed, as well. “We’re clearly less adaptable than before,” Howard says. “We have lost the people who were technology inventors. They have gone out to Avidia, Codexis, or Verdia, where a bunch went with new technology that was built by Amgen.”
Three of Maxygen’s biosuperior proteins are on investors’ radars: One is Alphainterferon, a pure embodiment of gene-shuffling technology, partnered with Roche. Early-stage clinical trial results will be announced later this year, with a clinical trial launched in HPV (human papillomavirus) patients. Another is a wholly owned GCSF (granulocyte-colony stimulating factor, an agent used to encourage the bone marrow to produce more white blood cells) that has undergone multiple preclinical animal trials and will compete with today’s best-in-class drug—Amgen’s Neulasta. Called MAXY G34, it has just entered middle-stage trials in breast cancer. Then there’s proprietary Factor VII, MAXY-VII, which is in late preclinical testing and designed to go head-to-head with Novo Nordisk’s blockbuster Factor VII, NovoSeven, to treat hemophilia.
As Russell Howard said in 2001, “If an organization dies but the people and ideas go on to generate valuable products,” there’s little to mourn. But some investors have had their doubts. “I think it is absolutely fair to say that we have not yet delivered the commercial return,” Howard says. “We have leveraged the technology and created a fantastic cash war chest, and devoted shareholders…. Now we are dependent on the success or failure of the small number of highly invested protein pharmaceutical drugs. If they win, we’ll be heroes. If they fail, we’ll be in the dust…. Our value is no longer in the technology as a potential, but the reality of what will the products do in clinical trial. So it’s a big change—we’re now in the lap of the gods.”
