Given the recent report that new drugs are now estimated to cost $1.7 billion to develop, there is a constant drive among pharmaceutical companies and biotechs to become more productive. In fact, many biotech companies were founded on that premise. Remember the dreams of all those genomics-based companies in recent years?

Well, Telik (NASDAQ:TELK) is one of those companies that promised better research productivity. It was founded on a technology called "TRAP," which pre-screens compounds that are likely drug targets. This allows the researchers to pick out chemical scaffolds that will interact with the right target for their disease of choice. Instead of screening 2 million compounds, Telik's researchers have found drug candidates from screening just 200. At first, as a private company, Telik tried to license its discovery technology to Big Pharma, but there weren't enough takers.

Then about six years ago, Telik made the switch to drug development, went public in 2000, and has been pushing its own drug candidates through clinical trials.

Telik's lead compound, Telcyta, is an ingenious little Trojan horse. Like the original Greek gift, the drug is in an inactive form when the patient pops the pill. When a cancer cell grabs ahold of it from the bloodstream, however, the drug emerges from its molecular shell and transforms into a killer by taking advantage of a protein found almost exclusively in cancer cells. So, when a normal cell absorbs it, nothing happens.

Telcyta has shown positive results in combination with standard chemotherapy in ovarian cancer patients whose tumors had already survived the toxic chemotherapy drugs alone. These patients have very little hope for long-term survival. With Telcyta, there was a 100% disease stabilization rate and a 33% regression rate. Though only a small study, these are impressive results for a tough-to-beat cancer. The phase III trial is ongoing, but with FDA fast-track status, approval should come when and if positive data arrive.

Telcyta has also received fast-track status for lung cancer where, combined with another chemotherapeutic, it achieved an impressive response rate of 29% and 69% stabilization rate. In comparison, AstraZeneca's (NYSE:AZN) Iressa was approved by the FDA and had a response rate of about 13% in patients with lung cancer.

Telik's stock didn't rise very much on the recent news, most likely because the company sold 8.625 million shares in November to raise over $170 million, a dilution of over 20%. However, it has also already doubled this year.

As a final note, Telik is unusual for a smaller biotech or pharmaceutical company in that it is developing nearly all of their compounds without partnering with bigger pharmaceutical companies. So if Telik hits it big, investors should reap all the rewards.

David Nierengarten, Ph.D., works with a biotechnology venture capital fund. He often contributes to Fool.com and is an active member of the TMF Community as DavidMN. He does not own shares of any of the companies mentioned. He appreciates your comments at davidnierengarten@mac.com and on the Biotechnology discussion board.