Genetic research alliance expands Human Genome, SmithKline to include 3 more firms in work

Biotechnology

July 03, 1996|By Abbe Gluck | Abbe Gluck,SUN STAFF

Human Genome Sciences Inc. and SmithKline Beecham PLC said yesterday that their combined efforts to use genetic coding to develop new drugs had generated so many opportunities that they have invited three more companies to share the work.

In addition to renegotiating their own 1993 agreement, Human Genome, the Rockville-based biotechnology company, and SmithKline of London said they will receive at least $140 million for opening their alliance to other pharmaceutical companies eager for access to their human gene research.

New Jersey-based Schering-Plough Corp. said it will pay Human Genome and SmithKline $55 million over five years for access to the companies' combined gene database, and France's third largest pharmaceutical group, Synthelabo, said it will pay $35 million for that access over the same period. The money will be split equally between Human Genome and SmithKline.

Schering-Plough and Synthelabo also will pay additional research fees and royalties to Human Genome. SmithKline will retain the marketing rights to some products that stem from the agreements.

Human Genome and SmithKline, the world's ninth largest drug maker, also said yesterday they had signed a letter of intent with Germany's Merck KGaA, for a similar deal worth about $50 million. Last year, the companies also signed a deal with Japan's Takeda Chemical Industries.

Human Genome and SmithKline's collaboration over the past three years generated "more opportunities to develop pioneer pharmaceutical products" than the companies can handle alone, William Haseltine, Human Genome chairman and chief executive, said at a news conference.

Yesterday's deals allow more companies to benefit from collaboration. "It would be wrong to leave opportunities unexploited," said Brad Lorimier, Human Genome's senior vice president of development.

Richard Koenig, spokesman for SmithKline, agreed. "The objective is to share this pow-erful discovery tool with other bTC companies in an effort to create more innovative products for all of us to market," he said.

With more scientists working, more new products will likely be developed, Koenig said. And that means more royalties and marketing rights for Human Genome and SmithKline.

"This is a big deal, and I think it will take a while for people to digest it and understand it," said David Molowa, a biotechnologies analyst at Bear Stearns & Co. in New York.

"First of all, they brought in two additional partners, so you have that many more scientists working on new products, and if you include Merck, you're talking about guaranteed cash payments to Human Genome alone of $90 million," Molowa said.

The agreement also moves Human Genome, initially a gene-sequencing company, closer to its goal of entering the pharmaceutical market, Lorimier said.

By renegotiating the 1993 agreement with SmithKline, Human Genome can now independently develop therapeutic proteins. Under the 1993 agreement, SmithKline had the right of first refusal to develop those proteins, Lorimier said.

Shares of Human Genome fell 12.5 cents to $35.125 yesterday, while SmithKline shares rose by 50 cents to $55.50 on the New York Stock Exchange.

Pharmaceutical stocks are generally unaffected by deals like this, said Reijer Lenstra, who tracks biotechnology stocks at Smith Barney in New York. "The stocks will move when the products reach the clinical stage, when they appear successful on humans," he said.

And although 4-year-old Human Genome has yet to turn a profit, profits may not be the most important thing, said Molowa of Bear Stearns. "You can build value in your company without making money, and that's what they're doing."

From Schering-Plough's perspective, the agreement provides it with "access to HGS's primary human genomic database, which is the largest and most complete available anywhere," said Steve Galpin Jr., vice president of corporate communications.

That access "will provide Schering-Plough with an important competitive advantage," he said.

Schering-Plough's business, which is 80 percent pharmaceutical, includes brands like Coppertone sun products and Dr. Scholl's foot-care products.

In addition to its pharmaceutical agreement with Human Genome and SmithKline, Schering-Plough also signed a separate agreement with Human Genome to collaborate in the field of gene therapy, through which defective genes are replaced with healthy ones.

In February, Schering-Plough strengthened its presence in that field when it acquired the private San Diego gene therapy company, Canji.

Human Genome, which currently employs 250 people in Rockville, plans to increase its staff by about 50 workers by the end of the year, Lorimier said.

Pub Date: 7/03/96

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