Human Genome gains ally Rockville researcher, German drug firm form commercial ties

Finding genetic treatments

SmithKline Beecham is included in new 3-way partnership

Biotechnology

April 19, 1996|By Mark Guidera | Mark Guidera,SUN STAFF

Human Genome Sciences, the Rockville company attempting to map the entire human genetic code, said yesterday it has landed European pharmaceutical giant Merck KGaA as another strategic partner to develop and commercialize new drugs from its genomic research.

The alliance includes SmithKline Beecham, the world's ninth largest drug maker, which has been collaborating on research with Human Genome since 1993.

The latest deal creates a three-company research powerhouse focused on targeting an array of diseases and ailments to develop new vaccines and drugs based on genetic research, industry analysts said.

"This is a very smart deal for everyone involved, and has the potential to be very lucrative for Human Genome should either company commercialize a product using their gene data," said Reijer Lenstra, a biotechnology analyst and gene research expert with Smith Barney in New York.

Developing and getting to market a new drug or vaccine based on genetic research could take as long as a decade, but increasingly leading drug companies are banking on genetic information to provide powerful new tools for creating products of the future, say industry experts.

Yesterday's news sent Human Genome's stock price up $1.75 per share yesterday to close at $41 on trading of 239,000 shares. Merck KGaA's stock was unchanged yesterday on the Frankfurt Stock Exchange.

Human Genome's stock, which has jumped 221 percent in the past year, may have gotten more of a bounce yesterday had the three companies released more financial specifics of the deal, analysts said.

The agreement with Merck KGaA is likely worth millions in licensing and research payments for Human Genome, which has aggressivly been pursuing research collaborations. As a result of the 1993 alliance with SmithKline, the Rockville company has received more than $120 million so far.

The three companies, which have agreed only to a letter of intent so far, said that the agreement calls for Human Genome to receive an undisclosed licensing payment up front for its gene data from Merck KGaA.

The Darmstadt, Germany-based company, which is one of Europe's largest pharmaceutical and chemical houses, had 1995 revenues of $4.3 billion. It is not affiliated with New Jersey-based drug maker Merck & Co. Inc.

The German concern, which has more than 2,000 researchers and scientists, is cash flush at the moment, having raised $1.75 billion late last year when it sold 45 million shares in one of Europe's largest initial public offerings.

Human Genome also will get payments from Merck KGaA based on research and development milestones, if they are met. And most significant for the Rockville biotechnology company, said analysts, it would receive royalties from any new pharmaceutical products that are developed and commercialized through the joint Merck KGaA/SmithKline Beecham laboratory effort.

"This brings another significant research organization to the effort to identify targets and products from our bank of genetic information," said Brad Lorimier, senior vice president for

business development for Human Genome.

Mr. Lorimier said Merck KGaA and SmithKline would likely cooperate on targeting which diseases, pathogens and ailments focus on based on Human Genome's gene data bank, but would likely pursue independent research and development projects.

Under the agreement, SmithKline and Merck KGaA would pay each other royalties based on products they develop and commercialize that were the result of their research collaboration, said Mr. Lorimier.

Richard Koenig, spokesman for SmithKline, said the company sees the collaboration as a good fit because the German company shares its strategy of pursuing genetic research as a tool to advance research on pioneering drugs.

SmithKline, he said, also sees the alliance as a potential avenue for establishing a stronger foothold in the German drug market.

Mr. Lenstra, the analyst, said it's likely SmithKline also was agreeable to the deal because it realized that it could not identify research targets and develop new drugs and therapies on its own because the human genome is so large.

There are an estimated 100,000 human genes. Genes give the body's cells their job instructions, and are made of thousands of "base pairs" -- couplings of molecules strung along the double helix of DNA, the building block of all life.

Human Genome has almost 200 patents on discoveries it has made based on the codes for human and other genes.

This is probably the first of several more deals for Human Genome with pharmaceutical companies, said Mr. Lenstra.

"It's the way to go for drug makers. In five to seven years, all of the human genes will be sequenced. If you are a drug maker, you are going to want to sign up now with a company like Human Genome to have access to that information, or else you could be left behind."

Pub Date: 4/19/96

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