The future is in foam

NICKY BLACKBURN, Oct. 1, 2003

Not many companies can boast two multinational deals after just nine months in business, particularly in the notoriously plodding drug market.

But six-man startup Foamix, which recently signed two such agreements (and has two more in the pipeline) is clearly offering industry giants something they desperately require - foam.

Foam is widely considered to be the future for dermatological drugs. Instead of having to rub a cream or ointment into the skin - a process that is inefficient, time-consuming, and leaves the skin feeling greasy - future skin-care patients are likely to receive their treatments in a foam that can easily be smeared across large areas of the body with minimum fuss and maximum absorption.

While pharmaceutical giants worldwide recognize the value of foams and mousses as a more efficient delivery system, most lack the expertise to create foam for themselves.

That's where Foamix comes in. Foamix, based in the Ness Ziona science park, has developed a light emulsion-based foam that can be used as a carrier for a number of drugs and cosmetic ingredients, including water-soluble and oil-soluble agents. The foam, which has already been tested on people, is alcohol-free and contains skin-conditioning oils. It can spread easily onto large areas of skin, and is absorbed quickly without leaving a greasy residue. It can even be spread over burns and open wounds.

"Once people try our foam they prefer it to existing creams and ointments," says Dr. Dov Tamarkin, one of the three founders of Foamix. "Our foam is fluffy and smooth, and acts like a good cosmetic cream, so it gives the skin all the properties it needs."

The field of dermatological drugs is lucrative. Out of 823 million visits to physicians in the US in 2000, 35 million (4.2%) were to dermatologists. The market is worth about $4 billion a year.

Foamix is working on several different applications for its foam. The first is a drug treatment for psoriasis - a chronic disease that causes thick scaling all over the body. Psoriasis ranges in severity from one or two lesions to widespread dermatosis that can be extremely unsightly and emotionally distressing. Nearly 13 million people suffer from psoriasis worldwide, and seven million in the US alone. Annual outpatient costs for treating it in the US are estimated at $1.6 billion to $3.2 b.

Yet despite the size of the problem, existing treatments are neither particularly convenient nor effective, and steroids, immunosuppressive and retinoids can cause side effects.

Foamix is adding the active ingredient from an existing treatment for psoriasis to its foam. Tamarkin believes this will dramatically improve the efficacy of the treatment, and make it easier to deliver to large areas. He also adds that the foam will lubricate and protect the skin.

Foamix has now completed development of this new drug format, and has received permission to start Phase II clinical trials in Israel in October. The four-month trials will be held at the community clinic in Netanya, and will involve 30 patients. If they are a success, Tamarkin hopes to bring in a multinational partner. Negotiations are already under way with several major players.

Tamarkin has no illusions that Foamix can carry out development alone.

"We are a small company from Israel, and we do not pretend to be something more," he admits. Foamix expects to introduce this new psoriasis treatment to the market in three to four years.

Foamix is also working on a new treatment for atopic dermatitis - a common childhood skin inflammation that affects about 10% of all children. The skin complaint affects large areas and causes itching and redness.

"Foam is a much better treatment method for children, who are usually very sensitive to having creams and ointments rubbed into their skin because they find it painful," says Tamarkin. "The foam is much easier to smooth into the skin, making it much easier for mothers to treat their children."

Earlier this year, the company tried its treatments for psoriasis and atopic dermatitis on patients in an unofficial trial. Most showed substantial improvement after 10 to 14 days, the company claims, compared to the usual two to six weeks for traditional drugs.

"If a patient feels good about the treatment he is receiving, then he will follow his instructions. The results are therefore much better," says Tamarkin.

Aside from pharmaceuticals, Foamix is also working on a line of cosmeceuticals - cosmetic formulations that have a function. The first of these is a skin-whitening treatment that can also treat birthmarks. The company has already completed this product, and plans to start marketing it to Asia - where skin-whitening products are in great demand - in the first quarter of next year. Other applications include foams to act against cellulite, oxidants, and wrinkles. Altogether next year, Foamix intends to introduce three or four new cosmeceutical products.

Aside from this work, Foamix is also seeking agreements with multinationals to jointly develop foam versions of their drugs. Tamarkin declines to name names, but says that so far Foamix has signed with the world's largest dermatological drug company, and with one of the top 10 pharmaceutical firms, and has begun work on prototype foams. Once these are completed, Foamix hopes to sign licensing agreements. Two other similar deals are likely in the next few weeks. Each is worth several hundred thousand dollars.

Though the agreements are still at an early stage, Tamarkin believes that Foamix will win a major licensing agreement worth between $2 million-$5m. by the start of next year.

"Having license deals with market leaders is very important," says Tamarkin. "It makes the future very promising." Tamarkin admits that it is unusual for multinationals to sign with such a young start-up.

"Usually it would take two to three years," he said. "Evidently, however, they are willing to sign contracts for this, because foam is so attractive right now. People are discovering the advantages and possibilities of it, and it seems appealing to them. We are really an exception to the rule."

Foamix was founded by three entrepreneurs, all with years of experience in dermatology and cosmetics. Tamarkin has worked for 16 years in the pharmaceutical industry, for Teva Pharmaceuticals, and for a number of his own companies including Tamarkin Pharmaceutical Innovation (TPI), which is developing a treatment for acne. Meir Eini has also been involved in healthcare for 16 years. The third partner, Doron Friedman, is an expert in bio-phamaceutics, and was head of R&D at Pharmos for many years.

The three set up Foamix in January 2003, but work on the technology began earlier. The company has filed six patent applications.

Investment came from the founders themselves. The company is currently surviving on revenues from its deals with the multinationals; sales will begin next year.

Foamix is now looking for investment, and hopes to raise $5m. The first step of this round should be completed by the end of this year. Though raising investment in this sector is generally problematic, Tamarkin says that in this particular venture, the processes have all been shorter than expected.

With this capital, the company hopes to hire new staff and develop new drugs using the foam base, including antibacterial drugs, anti-fungal drugs, anti-viral drugs, and even local anesthetics.

Tamarkin says Foamix is one of only two companies in the world developing a pharmaceutical foam. The other is Connetics, a 10-year-old US firm which employs 211 people and last year saw revenues of $53m. The publicly traded company introduced its first foam products, both aimed at psoriasis of the scalp, in April 1999, and is considered the pioneer of this type of drug delivery. Its foam products have been extremely well received.

So what chance does a tiny Israeli organization have against a competitor like this? Tamarkin claims that Connetics's product has some major disadvantages. Its foam, for example, contains high levels of alcohol, which has a drying effect on the skin and is not recommended for people with skin problems.

So far, Tamarkin is not aware of other companies moving into this area.

"Judging from the patent literature, there hasn't been much activity," he explains. "It's not easy to develop a foam that has a nice texture when it comes out of the can, and which can be easily absorbed."

Israeli pharmaceutical company Agis Industries, a specialist in generic dermatology drugs, admits it is considering this market seriously, and has begun developing its own foam.

"Foams and mousses will become a very important part of our dermatological portfolio three years from now," says Mori Arkin, chairman of the board at Agis.

Tamarkin says he is not concerned by talk of competition.

"We are working with many companies simultaneously," he says. "Our strength is that we can accommodate certain co-development programs and still create treatments of our own to increase the value of what we are doing."

Tamarkin also believes the market is big enough for a number of players.

"Our US consultants think the opportunity here is very wide because there are so many drugs that require a new face. The dermatology market is limited to an extent because of the limited variety of drug forms. We are offering a new option. We are not going to cannibalize other players; we are going to expand and increase the market, because more and more patients will find this new form of delivery attractive."