ACES profile: From student union to spin-out

Neville McClenaghan, co-fouder of Diabetica Ltd.

“I came up with the idea to put green food colourant in the beer for St Patrick’s Day,” said McClenaghan, who needed the job to manage Sweden’s then significantly higher cost of living than Northern Ireland. “It worked so well the place was packed, the beer sold out, and we even had to put dye in the good beer, too.” His reward: a temporary key to the candy cupboard for extra snacks.

Now McClenaghan, a co-founder and the chief operating officer of University of Ulster spin-out Diabetica Ltd, is looking for ways to leverage the company’s research to improve public health, and hopefully contribute to the economy. “The success of a company is with the wealth it creates and economic development,” he said. “In the United States, a large industry [biotechnology] grew out of a relatively small number of excellent ideas and technologies. An economic downturn is a time when creative people are needed.” He added that society now has to look to scientists, in particular, for help.

Diabetica was established in September 2004 to commercialise the discoveries at the Diabetes Research Group in the University of Ulster, Coleraine, UK. The company develops novel therapeutics, diagnostic and other technologies in the areas of Type II diabetes, obesity and metabolic syndrome.

McClenaghan, who also heads the university’s School of Biomedical Sciences, and co-founders Peter Flatt and Finbarr O’Harte, both professors at the university, won an inaugural ACES Academic Enterprise Awards Europe 2008 from the Science|Business Innovation Board last December in life sciences, one of the six award categories. ACES is the first pan-European programme to recognise enterprise in universities and research institutes. Flatt also serves as chief scientific officer of the company and O’Harte as head of peptide chemistry.

Tapping IP

In the late 1990s, McClenaghan and his university colleagues were undertaking some testing for industry, and decided to look at their own portfolio to see if there was any intellectual property and potential patents. “We started patenting, and then formed the company,” said McClenaghan, who initially focused on creative arts subjects, but in secondary school shifted to the more economically practical scientific disciplines. He took on the role of chief operating officer to help with business development to commercialise the company’s patents, he added. The company now has 16 key patents and other intellectual property.

“Patents are the real asset at the heart of any biotech company and potential products and value you have to offer,” said McClenaghan. Rather than amassing the resources to take intellectual property to the clinic, Diabetica is focused on generating patents and either licensing its technology or forging partnerships with large pharma to further develop and then commercialise it.

The company is targeting huge public health markets. There are at least 171 million reported cases of diabetes worldwide, and the World Health Organization (WHO) estimates that figure will more than double by 2030. WHO also estimates that more than 1 billion adults globally are overweight, and at least one-third of those are clinically obese. Diabetica’s therapeutics and diagnostics are aimed at the so-called “diabesity” epidemic.

McClenaghan holds PhD in cellular biochemistry from the University of Ulster, from which he also earned a BSc degree in biomedical sciences with a diploma in industrial studies. As part of his undergraduate degree, he spent a year as a research assistant in Uppsala University’s department of medical cell biology, where he began his research on diabetes. He also was a postdoctoral research fellow at the Institute of Clinical Biochemistry, Hannover Medical School in Germany. At the time, there was a push in Germany to translate research into new discoveries. McClenaghan returned to Ulster to continue his research in diabetes, which ultimately led to the formation of Diabetica.

A non-invasive diabetes, obesity therapeutic

Diabetica has developed a glucose-dependent insulinotropic polypeptide (GIP) platform technology. So far, it has two drugs under development, an insulin-stimulating GIP agonist, and an insulin-sensitising and weight-loss promoting GIP antagonist. The drugs are built from naturally occurring human peptides. McClenaghan said the company has a large amount of preclinical data from genetic and diet-induced models of obesity/diabetes showing that long-term therapeutic GIP blockage could prevent weight gain and reduce obesity with decreased fat deposition and percentage of body fat.

Diabetica signed an agreement in March 2006 with Amylin Pharmaceuticals Inc. of the United States to develop its GIP agonist drug candidate and take it to market. The upfront and milestone payments could potentially total $41 million, and there could be significant sales royalties.

The company also has a deal with an undisclosed large pharmaceutical company’s diagnostics subsidiary to develop its pre-diabetes/diabetes biomarker. It also is licensing its bioengineered cultured human insulin-releasing pancreatic beta cells to Boehringer Ingelheim and others.

In addition, Diabetica has a platform technology based on the peptide cholecystokinin. It is focusing on identifying a lead appetite-suppressing, weight-reducing molecule for commercialization and clinical development.

Be creative, but focus on the practical

A key to Diabetica’s success so far has been frugality, keeping its burn rate low and making every penny count in the typically high-burn biotech industry, said McClenaghan. Besides the industry deals, it has an undisclosed amount of venture capital money from UUTech and specialist VC firm Seroba BioVentures.

“We were very resourceful with seed money and careful with how we funded R&D,” said McClenaghan. “This was strategic so we didn’t have to seek large amounts of funding in rounds.” The company also has avoided investing in buildings and other capital-intensive activities.

McClenaghan advises would-be spin-outs to be mindful of their skill base and money. “Don’t spread yourself too far,” he said. “Our key has been to be totally flexible with relationships with big pharma. We don’t currently have the aspiration to acquire the necessary resources or expertise to take a drug to market ourselves.”

He also said spin-outs should be realistic about the value of what they have. “It’s very easy to initially overvalue what have. Know your limitations and opportunities,” he said. “Don’t spin out a company with just one piece of IP. You need a pipeline of IP. If you don’t have a tangible or conceivable pipeline, you’re not really in a good position to form a clearly sustainable company, but this does not preclude your achieving a solid licence agreement instead.”