Johns Hopkins Gazette: January 23, 1995

Biotech Firm To Set Up Shop in Fells Point

Company among first
start-up businesses
in empowerment zone

By Mike Field

     A new company, formed to commercialize recent discoveries by
Hopkins researchers in how blood cells develop, has announced
plans to locate its offices and laboratories at Belts Wharf in
the city's Fells Point neighborhood. 
     Gryphon Pharmaceuticals becomes one of the first companies
to locate within the city's new empowerment zone, a federally
sponsored redevelopment area that will entitle Gryphon to claim
certain tax credits and other benefits. It is the seventh
spin-off company created based on research and discoveries made
in Hopkins School of Medicine laboratories since the university
began encouraging such efforts less than three years ago.
     It has long been hoped by city and university officials
alike that the convergence of pioneering research performed in
Hopkins laboratories coupled with financial incentives such as
those offered in the new empowerment zones would lead to a
biotechnology-based boom in new businesses, new jobs and new
sources of funding for both the university and the city. 
     Although initial projections proved overly optimistic, there
is a growing sense that the hoped-for synergy of findings and
finance is at last beginning to happen.
     Key to the growth in new companies, say university
officials, was the 1992 decision by the board of trustees to
approve a dramatic change in university and School of Medicine
policies concerning equity ownership and royalties from the
licensing of discoveries made in Hopkins labs. The new policy
permits the university and its faculty to hold equity in
companies commercializing those discoveries--albeit with strict
rules concerning the eventual sale of stock or other shares. The
changes encourage the disclosure and development of discoveries
with the prospect of financial reward for both the university and
the scientists who make the discoveries.
     "I think we are on a move," said School of Medicine Dean
Michael E. Johns. "If you look at the number of disclosures of
discoveries, the number of patent applications and the number of
licenses and options granted over the past five years, it's a
line sloping strongly upwards. The [1992] changes in policy came
at a time when our entire environment was recognizing the need to
transfer technology. Increasingly, this is what we're seeing
     Gryphon Pharmaceuticals will develop discoveries made by
Curt Civin and Donald Small, professor and assistant professor,
respectively, of oncology and pediatrics. Their research focuses
on how hematopoietic stem cells found in bone marrow eventually
go on to produce all the component parts of blood, such as the
red and white blood cells and platelets. 
     "These cells are the grandmother of all cells in the blood
system," said Dr. Small. "We believe if we can learn how to
amplify their numbers we could increase the body's ability to
replenish component parts of the blood." 
     Such an ability would have a wide range of applications,
including use in the treatment of leukemia and solid tumors.
     "Currently, the limiting factor in high dose chemotherapy is
the bone marrow's ability to replenish blood cells," Dr. Small
said. "Even using a bone marrow harvest and rescue, as is
frequently now done for chemotherapy patients, it still takes
many months for the body to replenish these cells. If we could
increase the rate of recovery, we could conceivably increase the
dosage of chemotherapy and ensure complete destruction of the
cancer cells."
     Hopkins will contribute to Gryphon the intellectual property
rights to four proprietary molecules thought to affect the growth
and development of hematopoietic stem cells, as well as exclusive
commercial rights to certain future scientific discoveries from
the laboratories of Drs. Civin and Small. In turn, Gryphon will
provide $2.2 million in research funding as well as the business,
legal, management and facilities support for the new venture. 
     An initial capitalization of 5 million shares of Gryphon
stock provides the university, Dr. Civin and Dr. Small each with
a minority share in the venture. University policy prohibits its
participants from trading the stock until two years after the
first commercial sale of products resulting from the Hopkins
     Financing for Gryphon came from Osiris Therapeutics Inc., a
2-year-old biopharmaceutical company based in Cleveland. As part
of the deal, Osiris will move its company operations and 32
employees to the Belts Wharf facility, bringing not one, but two
new companies into Baltimore. 
     "We need to be in proximity to a major university medical
center in order to be able to recruit people with the skills we
need," said Osiris president and CEO Jim Burns. 
     Osiris owns and has been developing proprietary technology
based on mesenchymal stem cells, cells similar in many regards to
hematopoietic cells. Mesenchymal stem cells are the progenitor
cells for bone and connective tissues. 
     "I'm convinced that our two groups of scientists working
together to find the regulatory molecules in these cells will
make discoveries that could only occur in this manner," Burns
     The funding of a new company by an existing one is a recent
development in the world of biotechnology start-ups. 
     Previously, most funding had come from venture capitalists,
although lately the national press has reported an increasing
reluctance on the part of investors to bear the high cost and
high rate of failure of such businesses. For Wall Street, say
many analysts, the bloom is off the biotechnology revolution. 
     "The fact that Gryphon was created by an existing company
shows that when you've got a good invention, there is funding to
be found," said Fran Meyer, associate dean for technology
licensing at the School of Medicine. "This latest venture is
further evidence that the policy change of 1992 was needed, and
the policy is working. I think largely due to the revolution in
molecular biology, we are seeing more and more inventions that
can be developed into commercial products."
     Dr. Meyer cautions that not every discovery--no matter how
important it may seem to researchers involved--can earn the kind
of attention and investment evidenced in the Gryphon agreement.
     "A discovery must represent a significant breakthrough in
technology," said Dr. Meyer, whose job it is to evaluate the
dozens of discoveries made in School of Medicine labs each year.
"It must be an invention that will result in strong patent
protection and that can serve as a platform for several new
products, hopefully with widespread applications. The faculty
involved in the discovery must be interested and willing to work
with a company in further development and finally, in order to
attract financial backing, there must be the potential for the
new company to grow from zero to $100 million in sales in eight
to 10 years."
     The potential for large dollar sales in the new products is
necessary to attract investors because of the large risk
     "There has to be the potential of significant return because
of the huge amounts of money that are required in development,"
Dr. Meyer said. "This is why we only expect to see two or three
new companies a year, instead of the 10 or 15 some people were
once speculating about. There are really only a limited number of
discoveries made each year that will qualify. Even so, this
represents an important development for the future. The economic
impact of these discoveries is going to continue to grow."

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