Synbiotics, the ‘Anti-Id’ Company, Sees 1991 as Important Year for Firm

SAN DIEGO â€”  Synbiotics Corp., which has hitched its star to the complex but promising “anti-idiotypicâ€� monoclonal antibody technology, recently proclaimed 1988 to be the “Year of the Anti-Id.â€� To be sure, the past year brought several important advances for Synbiotics, which hopes to commercialize “anti-id,â€� a second-generation monoclonal antibody technology.

But Synbiotics President Edward Maggio agrees with biomedical industry observers who believe that 1991 will be an even more important year for the self-proclaimed “anti-id company,� whose stock in recent months has stalled at about $4.

That year is important because that is when Synbiotics has promised to introduce the first of many therapeutic products using its proprietary “anti-id� technology. Those two initial products--synthetic vaccines to prevent feline infectious peritonitis and canine heartworm--are now in clinical trials at the U.S. Department of Agriculture.

Watched Stock Drop

The two product introductions will be watched keenly by investors who have watched Synbiotics’ stock drop to around $4 from slightly above $10 during 1987.

“The key investment consideration . . . (for Synbiotics) is whether it can successfully launch the two veterinary products in 1991,� said Ken Bohringer, a New York-based industry analyst with Prudential-Bache. “The other consideration is if they have sufficient capital to get by in the interim.�

Anti-idiotypic monoclonal antibody technology is expected to play a role in both diagnostic and therapeutic applications in veterinary and human applications, according to industry observers. Companies such as Synbiotics, San Diego-based Idec and Redwood City-based Ideon are using anti-id technology as the basis for a variety of diagnostic and therapeutic products.

On the diagnostic front “the key is ‘user friendliness,’ that over-used word,� according to John Phillip, president of U.S. operations for Lincoln, Neb.-based Norden Laboratories, which markets veterinary products. “The simpler (these products) get, the more use they will enjoy in veterinary clinics and in (farm) applications.�

Synbiotics has introduced a dozen diagnostic kits for the veterinary market that use first-generation monoclonal antibody technology. But margins on the test kits are tight, so Synbiotics and other companies are rushing to enter the more-lucrative market for preventive vaccines and products that will treat existing medical conditions.

Estimates on the market for diagnostics and therapeutics vary, but the veterinary market is large because the more than 100 million Americans who have pets spend nearly $4 billion annually for veterinary care.

Part of Market

Industry observers predict that diagnostics and therapeutics using anti-id technology will snare part of that market.

“We don’t doubt that (anti-id) is here to stay,� Phillip said. “There are no therapeutic products on the market now, but . . . it’s just a function of time.�

Norden, which is licensed to sell Synbiotics’ existing products in Canada and Europe, believes that anti-id therapeutic drugs “will be distinctly valuable,� Phillip said. “They will be very important adjuncts to our (use) of vaccines in general.�

Despite the potentially bright future, investors have treated Synbiotics roughly because it--like many biotech companies--�always need another 2 years before the product is ready,� according to Irving Katz, director of research for Thomas Green/San Diego Securities.

“That’s so often the case for these young companies,� Katz said. “And 2 years is a long time to wait.�

“Synbiotics has an interesting technology, and they’ve had an early leadership position in anti-id� technology, said Jim McCamant, editor of San Francisco-based Medical Technology Stock Letter. “The question now is how valuable that technology is . . . we’ll see (the company’s future) with increasing clarity as we move toward 1991.�

“It can be a long grind,� McCamant agreed. “For even the early leaders, stock can act poorly because we all get impatient.�

Many small companies lack the funds needed to successfully introduce products. According to a study by Arthur Young & Co., only half of the nation’s 500 existing biotechnology companies will still be around in 10 years. Many will go bankrupt or merge with other companies, according to the accounting firm.

Maggio is optimistic about Synbiotics’ future. That optimism is no doubt buoyed by the fact that Synbiotics still holds $17 million in cash--including $13 million in proceeds from a June, 1987, public offering. Shareholder equity on March 31 stood at $20.5 million, down from $24.7 million a year earlier.

Synbiotics, however, will report a “substantial� loss for the year ended March 31, according to Maggio. Synbiotics reported a $2-million loss for the 9-month period ended Dec. 31. Synbiotics linked that loss to sales costs that rose by 121% to $237,000 during the third quarter ended Dec. 31 and the loss of a licensing agreement with SmithKline Beckman Diagnostics.

That loss, however, followed two successive profitable years in which Synbiotics reported $252,000 in total net profits.

Revenue for the year ended March 31 will total about $8 million, up from $7 million during the previous fiscal year. Product sales accounted for about $2 million of total revenue and licensing fees generated about $800,000 in revenue.

Bohringer and other analysts believe that Synbiotics has enough cash to complete development of the two veterinary products that are expected to enter the market in 1991. Synbiotics, which marketed its first monoclonal antibody-based product in 1984, hopes to develop a series of other therapeutic and diagnostic products that would deal with other animal diseases.

But Synbiotics, with 150 employees, doesn’t plan to stop with the veterinary market. Synbiotics hopes to do what relatively few pharmaceutical or biomedical companies have been able to do: Use its proprietary technology to expand into the market for diagnostics and therapeutics that would deal with human ailments.

Since 1984, Synbiotics has brought to market 13 test kits that veterinarians and animal-care clinics use to diagnose various medical conditions. The company has developed one veterinary therapeutic product.

But Synbiotics has produced just one human diagnostic kit that is being marketed. Two other kits that are ready for the market have been held up, however, until Synbiotics unsnarls the legal tangle that occurred when SmithKline Diagnostics canceled the diagnostics contract.

Synbiotics had hoped to use that contract to establish itself as a major player in the human diagnostics market. Company officials have acknowledged that the lost contract will shrink revenue during coming years. But they maintain that the contract loss will not slow development of new diagnostics and therapeutics for the human health-care market.

Synbiotics’ ambitious plan to move from veterinary to human products has caused “confusion� among investors and analysts, Maggio acknowledged. Consequently, the company is “taking steps that will bring more structure to our organization to help the perception� that Synbiotics has the ability to move beyond veterinary products, Maggio said.

Similarly, Maggio maintained that Synbiotics’ 150 employees, including 75 scientists, have the ability to handle the transition from veterinary to human products during the mid-to-late 1990s.

Synbiotics also is expanding the use of its proprietary anti-id technology. In February, Synbiotics formed ImmunoPharmaceutics, a subsidiary that will utilize anti-id technology to “exploit rational drug design,� according to Maggio.