By Karen Pihl-Carey

Staff Writer

Ariad Pharmaceuticals Inc. intends to sell its 50 percent interest in the Hoechst-Ariad Genomics Center LLC to Hoechst Marion Roussel (HMR), in return for reacquiring the rights to all drugs created as part of a 1995 collaboration.

The deal, outlined in a letter of intent signed Tuesday, is worth more than $100 million for Cambridge, Mass.-based Ariad.

It consists of a $40 million cash payment, the return of about 3 million shares of Ariad series B convertible preferred stock, worth $30 million, as well as $2 million in forgiven loans. HMR, of Frankfurt, Germany, also gives Ariad all rights to compounds resulting from their collaboration on the development of Src tyrosine kinase inhibitors for osteoporosis. HMR, which will still receive certain payments related to approval and commercial sale of Src inhibitors, had invested more than $31 million in that collaboration, said Ariad chairman and CEO Harvey Berger.

Ariad's stock (NASDAQ:ARIA) shot up 145 percent at one point on Tuesday. It closed at $1.062, up 50 cents - or almost 89 percent.

"HMR gets what they want, which is complete ownership [of the genomics venture], and the employees and management team," Berger told BioWorld Today. "We get the $40 million in cash, the Src osteoporosis candidates back, and the total value to us, we think is very substantial. We should have two-and-a-half years of money in place without any other financings."

Ariad expects to receive immediately $5 million of the purchase price, with the rest coming when the sale closes, which is expected to be by the end of the year.

Berger said HMR showed an interest in owning 100 percent of the center soon after Hoechst and Rhone-Poulenc SA, of Paris, combined their life sciences work into a new company, called Aventis Pharma AG, of Strasbourg, France. (See BioWorld Today, Dec. 2, 1998, p. 1.)

In 1997, HMR and Ariad agreed to commit $85 million over five years to fund the research at the center of identifying new therapeutic proteins and other genetic disease targets for regulation with small molecule compounds. The center is headquartered at Ariad's offices in Cambridge. (See BioWorld Today, March 7, 1997, p. 1.)

"We will lease the space to HMR," Berger said. "The current employees and management, 65 people that run it, will shift from being Ariad employees to being HMR employees. HMR may increase their commitment to genomics at the center here in Cambridge, so they're looking to expand their presence through this acquisition."

Berger said the sale enables Ariad to focus on bringing an osteoporosis drug candidate to the clinic as soon as possible.

Ariad and HMR first collaborated in 1995, in a deal worth up to $40 million for Ariad, to discover the underlying cause of osteoporosis and other bone diseases. The agreement was based on Ariad's work developing small molecule compounds that inhibit Src, an intracellular signaling protein that is among a group of molecules called protein tyrosine kinases. (See BioWorld Today, Nov. 7, 1995, p. 1.)

HMR had invested more than $31 million before announcing on Tuesday its intent to dissolve the collaboration with the purchase of Ariad's interest in the genomics center, Berger said.

Ariad has identified some potent candidates through in vivo testing in animal models of osteoporosis, and has a goal to select "one or more clinical candidates as soon as possible, but certainly by next year," Berger said.

Ariad's programs target small molecule drug discovery to block intracellular signaling pathways important to diseases, such as osteoporosis and immune-related disorders. It also is developing Argent, a proprietary gene regulation technology for orally active protein therapy and cellular immunotherapy. Argent uses small-molecule drugs to control intracellular signaling pathways in engineered cells.