What do they want, blood? The trials of a gene pioneer

As chief executive of Oxford GlycoSciences, Michael Kranda is developing revolutionary drugs. But investors can't wait for the future

The biotechnology sector is not short of a headline or two. Since the cloning of Dolly the sheep in 1997, the industry has made a habit of eye-catching breakthroughs – from piglets with luminous noses to the triumphant mapping of the whole human genome. Each advance has seemed to offer a glimpse of an exciting future where disease is beaten and the injustices of nature are finally brought under human control.

The trouble is, someone has to shoulder the huge burden of these promises, and the market is only now realising that the future could be a very long time away. For Michael Kranda, the chief executive of Oxford GlycoSciences, the problem is particularly acute. OGS continues to take giant strides into uncharted scientific territory, but even so, people are getting impatient: "They sell into bad news, they sell into good news; it's getting to be the nature of this game," he says.

The central event in this cycle was the completion of the Human Genome Project at the end of 2000. With the endorsements of world leaders ringing in their ears, the biotechs felt their confidence was justified; now they had the map, the navigation would be a breeze.

"The genome was seen as the be-all and end-all," says Kranda. "Once it was done, the miracles would quickly follow. The Genome Project was a prime example of a mismatch of expectations and reality."

Under Kranda, OGS saw that the mapping of the genome was just a first step, and that the real advances would be made from the daughter science of proteomics – understanding the genetic behaviour of the hundreds of thousands of individual proteins that dictate the way we work. By being one of the first to make this call, OGS has turned itself into a world leader in the field. The group makes the technology that maps the proteins, which means it is often the first to discover the new drugs' targets.

"We take a disease, find out which proteins are implicated and make them the targets," says Kranda, "Proteomics is about seeing how the different proteins in your body change throughout your life. This is the most exciting field out there, and I think there are going to be a lot of Nobel Prizes."

Once again, market forces have pushed Kranda into the difficult dual role of being a responsible "miracle cure" salesman. On one hand, he needs to talk up the vast potential of proteomics so investors will take the bait and the lab guys will have enough cash for test tubes. On the other, he needs to steer people away from another bubble mentality. He knows better than anyone that this new science is going to take some time to explore, and there will be disappointments along the way.

"The unexpected speed of gene sequencing made genomics possible. We want to do the same thing in proteins, but it is simply a much harder molecule to understand," he says.

The big problem is that, young science or not, the investment community is starting to drum its fingers. For traditional pharmaceutical companies, the emphasis has always been on the "pipeline" of new drugs. Increasingly, that word is starting to dominate analyst meetings with the biotechs.

But for the past couple of years, OGS has been able to deliver the prospect of something solid: it has developed a drug called Vevesca that targets the genetically-triggered Gaucher's disease. The disease itself affects a tiny section of the world population, but OGS's treatment represents much more than just a new medicine. It is an early example of how a fuller understanding of proteomics allows the creation of "magic bullet" genetic drugs.

Unfortunately, in its latest set of results, OGS admitted to a setback with Vevesca: it had spent more than analysts had forecast and indicated that more work would have to be done to assess its side-effects before it could be launched.

Immediately, the market hit OGS shares hard, knocking them down to their lowest level since November 1999. The slump put Kranda's company in a club of UK biotechs – including Celltech and Shire – that have all failed to convince investors that setbacks are more or less inevitable in this branch of science. Once the only "new economy" sector to survive the bursting of the 2000 bubble, biotechnology is suddenly having to justify itself. Recently, the share price of Biocompatibles took a beating when the group announced the £139m sale of its largest unit to a business partner. A year ago, that would have counted as a resounding endorsement of the technology, but now the focus is on what is left in the Biocompatibles pipeline.

The trend is a deeply worrying one for the biotechs, which are increasingly finding their entire business models under scrutiny, and their prospects of further investment in jeopardy. It is true that in many cases the pipeline of drugs from the biotechs is either thin or risky or both. Judged on the same scale as straight pharmaceuticals, it doesn't look good.

Nor does it look good for those investors who assumed that the biotechs would spend a few years bringing their techniques up to scratch, and then be bought by the large drugs groups.

"Big pharma certainly relies on biotech to provide a proportion of its research, but both sides have understood the value of alliances," says Kranda. "They aren't simply going to buy the biotechs. The pattern of partnership has taught the drugs firms a different lesson: 'why buy the restau- rant when I can pick off the menu?' "

Despite it all, Kranda remains sanguine. Unlike many of his rivals, OGS has still got a £176m cash war-chest to play with, and as he points out, vogues in the market change all the time. "I am optimistic because there is no doubt we are at the centre of a revolution that is changing the pace of discovery. Plus our business model is resilient: we make the picks and shovels and then we get out and go mine."

The recent announcement on Vevesca may have been a blow, but Kranda believes that the very existence of such a drug demonstrates the great possibilities of proteomics. "Gene discovery has become yesterday's news," he says, "but we will give people stuff to get excited about. I think people have just got to get to grips with the fact that biotech companies are not just going to sequence genes, file a patent and rule the world."