Wyeth-Ayerst Laboratories has agreed to pay Athena NeurosciencesInc. $9.4 million to extend for 18 months their four-yearcollaboration on discovering treatments for immune disorders andinflammatory diseases based on drugs that block white blood cellsfrom migrating to the brain.

Under terms of the deal, Wyeth-Ayerst, a subsidiary of Madison,N.J.-based American Home Products Corp., will pay Athena $4.4million in cash and lend it another $5 million to continue theiralliance until the end of 1996. The principal amount of the loan is tobe repaid in five years, however Wyeth-Ayerst has the option ofconverting the $5 million into 500,000 Athena shares at the end oftwo years.

Wyeth-Ayerst, of King of Prussia, Pa., began collaborating in 1991with Athena to develop orally active small molecules based onAthena's discovery of a monoclonal antibody designed to preventwhite blood cells from entering the brain where they can causesignificant damage.

Athena began Phase I studies in the U.K. last week with themonoclonal antibody for treatment of multiple sclerosis. Theantibody targets the alpha-4-beta-1 integrin, which is expressed onwhite blood cells. Preclinical studies demonstrated that when integrinis inhibited, it prevents pathogenic white blood cell trafficking.

Paulette Setler, Athena's chief scientific officer, said in thecollaboration with Wyeth-Ayerst both companies are working todevelop orally active compounds based on the monoclonal antibody,but they each are targeting their own indications for the drugs. Shesaid the companies expect to identify a lead candidate compound bythe end of this year.

While Athena is focusing on multiple sclerosis, Wyeth-Ayerst ispursuing other central nervous disorders and inflammatory diseases.

At the end of the fiscal quarter March 31, Athena reported about $40million in cash with a burn rate for those three months of $18 million.It has about 20 million shares outstanding.

Athena (NASDAQ:ATHN) closed Friday at $9.12, up 62 cents, a 7percent jump.