December 3, 2012 Issue
The Most Powerful Name In Corporate News and Information
Preclinical CRO Company, Absorption Systems is one of the Foremost Leaders in Bench-to-Bedside Translating a Pharma Product from the Bench to Human Outcomes
About Absorption Systems:
Systems is a preclinical CRO that not only performs contract testing but
also develops research tools that enable our customers to better predict
human outcomes. We have locations in both Exton, PA and San Diego, CA. We
work with a wide variety of customers within the pharmaceutical and biotech
industry, ranging from small, entirely virtual pharma companies to large
pharma companies with regular (weekly) testing programs and specialty CROs
looking for services that complement their own offerings. We also do
preclinical testing of many different types of medical devices. Our
flexibility allows us to adapt to the needs of each customer.
Mr. Dentinger, along with his business partner Ismael Hidalgo, co-founded Absorption Systems in 1996. The original premise, still a guiding principle, was that validated, reliable preclinical test systems could identify drug candidates with appropriate drug-like properties and help predict success in the clinic. Mr. Dentinger, who is responsible for the business side of the company, has overseen consistent organic growth of top-line revenue and bottom-line profit for fifteen years. The company has gradually expanded from the original emphasis on drug absorption to a much more diversified portfolio of contract pharmaceutical services and innovative service platforms.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – December 3, 2012
Mr. Dentinger: The idea we had when we founded the company was that the pharmaceutical industry was going through a bit of a change. There were technologies that were improving the ability to make and introduce chemicals that were hopefully destined to become drugs. These technologies, collectively known as combinatorial chemistry, allowed thousands of compounds to be made very quickly. In response to that, the industry was trying to figure out ways to profile these massive numbers of chemicals to determine which ones have drug-like properties. We saw that as an opportunity, and we introduced services that actually profiled these chemicals rather rapidly to determine whether they have properties that resemble a drug. That was the opportunity that we took. How that has played out is that we were correct in assessing the need to profile compounds in this way. Today, the technologies that were used to produce those thousands and thousands of chemicals very rapidly have kind of gone by the wayside. But the need to determine if a chemical has drug-like properties very quickly and very early in the whole process of discovering and developing a drug is more important now than ever.
CEOCFO: I am looking at your website which indicates, “Customization without compromise.” Would you explain that tagline and how it relates to what you do as opposed to your competitors?
Mr. Dentinger: In developing drugs, there is the chemistry component and then there is the biology component. The chemistry component we understand. We know how to synthesize molecules and how to make alterations that will hopefully impart more desirable properties. Then, when they are altered, we know how to look at them. The biology is more complicated because it is not based entirely on logic; it’s more random. One of the challenges is to understand how the biology works and how it affects and is affected by the chemicals that are put into your body. Although the approach is somewhat complicated, what we have done over the years is reduce it down to simplified steps. For example, we look at how a drug is altered when it enters the body. With the body of work we have compiled and the history we have, we have screened many different compounds. The challenge when you are looking at molecules is do we get into some sort of pattern recognition and do we understand how certain structures are associated with certain properties? That only comes by understanding each molecule individually. It is not a process that is necessarily scalable. It is a process built on historical experiences, historical data sets, and that is where the customization comes in. Every molecule, every project takes on a life of its own and tends to be unique unto itself.
CEOCFO: What is an example of a company that is coming to you and what is it that you are doing for them?
Mr. Dentinger: A typical company that will come to us is one that has determined that the molecule they are working on, which they want to become a drug, is intended to be delivered orally. Therefore, they want to put the drug into a capsule. Whatever indication they are working on −maybe high blood pressure− they know that the patient population is going to have to pop a pill or a tablet. In their testing, they have this molecule that they know is active in a test tube, but for whatever reason when they dose an animal with the capsule, they do not see the drug appear in the blood. The question is why? That is actually where we come in. We will be presented with a molecule that needs to be delivered by the oral route and the client will not know why, when they dose the compound orally, they don’t see it in the blood. There are a lot of barriers to that. The molecule has to be stable as it travels through the stomach and the GI tract, which are designed to actually break down molecules like proteins and lipids in such a way that we can absorb them. The question is, does that process destroy the molecule that may one day become a drug? The next step is that it has to get across the gut wall in order to get into the bloodstream. If the molecule does not cross that intestinal lining, it will not get distributed throughout the body, so we look at that. In the process of getting across the intestinal wall, it could be metabolized, so we look at that. Once the molecule is absorbed into the bloodstream, its first stop is the liver, which is the big metabolizing organ in our body. The question is, did the liver wipe it out? We start taking these individual pieces, looking at them and determining where the barrier is to this particular molecule getting into the blood. With the information we generate and the interpretation we provide, the client goes back and takes a strategy. If it gets out of the GI tract, we can detect it. If it does not get across the gut wall, there may be technologies to help us get it across the wall. If the liver is rapidly metabolizing it and it never sees the light of day for that reason, the client’s chemists will need to alter the molecule to make it more stable. That is how we interact with clients. With the information we give back to them, they can develop a strategy of what they have to do next. It could mean using technology to help improve drug delivery, or most likely it involves their chemists rethinking how they are going to design new molecules with more drug-like properties. We work with everyone from the biggest pharmaceutical companies to the virtual companies. A virtual company is a group of people who have licensed in a technology. They have no lab, so they have to outsource all of their research. They bring together a collection of consultants and contract research organizations such as ours, and they develop a drug that way by outsourcing everything. The big companies outsource specialty projects such as I just described. They have encountered a problem, they don’t have internal resources available or they don’t have the right internal expertise, and it is just easier to outsource. We work with a range of companies.
CEOCFO: How do you know when to give up on a project?
Mr. Dentinger: That is sometimes a difficult message to deliver to a client, and it actually happens all the time. You might start out with about ten thousand molecules in order to come up with one drug at the end. You go from 10,000 to one over the course of twelve to fifteen years. That is a huge attrition process. Obviously, the vast majority of the molecules you work with will not behave the way you want. Your question of when to give up is a great one and I do not have an answer for it. Often, what dictates that, especially with a small company, is that the client runs out of money because a lot of them never want to give up. Usually what drives this is the process that starts with someone identifying a target, which is typically a gene or an enzyme which, if we can alter it, we believe something good will happen such as curing cancer or decreasing blood pressure. The process of seeing a chemical bind to that target is really what gets the ball rolling. The thing is, binding to the target is one thing, but all the other aspects that have to be factored into a molecule to become a drug are these hurdles that still have to be overcome. Yet that original excitement of an interaction between a molecule and a target…it is hard to let go of that. That is what drives everyone, the hope that they actually have something. The reality is that the odds are low, so money usually dictates that. Most of the scientists we interact with are driven and never want to let it go. There is an innate desire to develop and discover drugs.
You work with medical device companies; what are you doing there?
CEOCFO: What is the competitive landscape for you?
Mr. Dentinger: The customized work that is submitted to the FDA and helps clients solve problems, there are competitors out there. Although it is competitive, the number of competitors that we go up against in that space is not that great. Where we have a bigger issue of competition is the more commoditized services. Services that are done on a more routine basis, more fundamental and simpler testing. The landscape has changed because the economy is less robust. When 2008 hit, there were two economies that affected us: the first was the global economy in general and the second was the pharmaceutical economy. Venture capital took a big hit, so their investments in startup companies over the last four or five years has gone way down and that is a big portion of our business. The other aspect is that the large pharmaceutical companies are going through unprecedented changes; the reason is that they are finding it extremely difficult to develop new drugs. Therefore, they are restructuring and redesigning their business processes and they are trying to define what their business model is going to look like in the future. With that being said, we also have over the last five years the emergence of competition from Asia; there, we are dealing purely on a price issue where everything is just done cheaper overseas and that is very attractive to people on tight budgets. That is the landscape that we are playing in right now.
CEOCFO: Do you find that concerns over quality in Asia are starting to change the idea that cheap is ok?
Mr. Dentinger: When you talk to a prospective client, you find that everyone sells the same services. We know that we do quality work and one of the things that is happening in these markets is because the pricing is so cheap, it is hard to ignore. The other element is that those are emerging markets so the pharma industry wants to develop relationships there. They are intrigued by the low cost. It is extremely expensive to develop a drug. All of those factors are wrapped together. I think what has happened is that the initial rush into India and China has subsided a bit. Everyone raced over there to get set up and to do this cheap work. What they have found out is that communication is difficult in general in this space, but it is compounded even more when you are going into a foreign country. Those countries have taken steps to address that issue. What they found out in the last four or five years is that they actually do some things very well over there and other things not so well. They are figuring out how to work with it. The initial rush to do everything cheaper over there and just rush over there, that euphoria has passed. They are beginning to find out how to manage it and what they are able and not able to do. The problem solving and customization is difficult to outsource even if you are in the same business park, let alone half way around the world. The commoditization comes across as being a little bit easier but everyone is sort of finding out what can and cannot be done.
CEOCFO: How is business today?
Mr. Dentinger: Business is actually OK, but it could always be better. What we are looking at since 2008, when everything came to a head, is how budgets are going to be, going forward. In this time we have gained some market share. Our business is growing, but it has been much slower than we anticipated. The other thing that has happened for us is we have not done a commoditization of some of our services that are driven purely on price. It is becoming less interesting for us to operate in that space because it is just not core to the company. We enjoy more of a problem-solving, high-end, sort of consultative interaction with our clients, and that typically does not happen from the commodity perspective. Even so, as the landscape is changing, we are adjusting with it. Business has been OK, but during this time it could be much better.
CEOCFO: How do you get across to prospective clients that you are different and that you take a different approach which overall can be much more helpful to them?
Mr. Dentinger: One is to be very technically savvy in your space and to do that requires understanding your space, the FDA perspective and understanding the EMA perspective. These are the regulatory agencies that are saying, “This is what it is going to take to get a drug approved.” We are also committed to innovation. One of the things we do here is we probably have about five percent of our staff dedicated solely to developing new models and techniques to help predict these drug-like properties. That is something we will never stop doing. The differentiator is proprietary, it is knowledge-based. One of the things that we have been committed to is not only generating data, but generating data and then putting into context with other drugs that are on the market, especially in the context of other drugs that were developed for the same indication. That differentiator has been critical for us and it has worked. In order to get that message across, it does require us to get in front of clients, and one challenge is that, often, clients are not even aware of the problems they have. That has been our challenge in this environment, where everything is changing constantly. Big pharma is reorganizing constantly. To fight the pressure of outsourcing to cheap markets, getting our message across is typically done in person and done by very highly technical sales people.
CEOCFO: Why should the business and investment community pay attention to Absorption Systems?
There is a trend now in the industry that talks about bench-to-bedside,
translational medicine, something happening at the bench and immediately
translating to human outcomes. We are one of the foremost leaders in this.
The FDA has approved a process whereby we can replace some human testing
with cultured cells at the bench. This is something we are expanding on and
this is the future of medicine. We are a phenomenal example of that and we
have many more things coming out. This is why they should pay attention to
“There is a trend now in the industry that talks about bench-to-bedside, translational medicine, something happening at the bench and immediately translating to human outcomes. We are one of the foremost leaders in this. The FDA has approved a process whereby we can replace some human testing with cultured cells at the bench. This is something we are expanding on and this is the future of medicine.” - Patrick M. Dentinger
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