By Mary Welch

Staff Writer

In a deal with a potential of at least $155 million, Onyx Pharmaceuticals Inc. signed an agreement with Warner-Lambert Co. to develop and commercialize ONYX-015, now starting Phase III trials, and two new armed anticancer vaccines.

The deal calls for Warner-Lambert, of Morris Plains, N.J., to make an up-front payment and equity investment over the next two years totaling $15 and pay for $40 million worth of the Phase III costs of ONYX-015, as well as any other necessary development studies.

Warner-Lambert also will provide support for the research and development of two additional products. In addition to the guaranteed money, Richmond, Calif.-based Onyx could receive up to $100 million in milestones for the three products.

"Essentially, Warner-Lambert will pay $40 million to develop ONYX-015, and if it goes over that amount, then we will co-fund 25 percent of the remaining costs," said Hollings Renton, Onyx's president and chief executive officer. "But $40 million should handle it."

How much stock Warner-Lambert will get in this deal won't be determined until the shares are actually bought over the next two years, he said.

"But, Warner-Lambert already owns about 6 percent [of Onyx's stock], so I think they will likely double - if not more, maybe into the low teens," he said.

"We are talking about significant funding," he said.

Currently, there are 11.5 million Onyx shares outstanding.

The two companies will share the costs of developing the two new products. Warner-Lambert will assume 75 percent of the expenses but the split of profits and the ownership will be 50-50, Renton said. The company has already identified one category of compounds - a prodrug converting enzyme - and is testing it in animals. The second product is undefined, he said.

Besides funding its lead product, the deal has other bottom-line benefits for the company, Renton said.

"The majority of our burn rate - $20 million a year - will now be funded by Warner-Lambert," he said. "With this deal we now go to a single-digit burn rate. We had a cash position of less than one year and now we have two years worth of cash on hand."

In addition, the deal supports the company's overall strategic position. "We made a decision to determine the value of our products in the clinic, he said. "We developed ONYX-015 to the point where we can make this deal and retain the rights to three products and share equally in the profits. These are three very strong opportunities for the company. We're picking the two next best products in our pipeline to develop with Warner-Lambert."

ONYX-015 is an adenovirus that has been genetically engineered so it no longer inactivates the p53 tumor gene in normal cells. Instead, it is designed to replicate in and kill tumor cells deficient in p53 activity.

Loss of p53 function is the most common genetic abnormality in cancer, with more than half of all cancers having this defect.

Last month the FDA approved the company's pivotal trial design of ONYX-015 for people with head and neck cancer. The two-arm trial will include more than 180 evaluable patients in more than 40 centers throughout the United States and Europe. Patients will receive either standard chemotherapy or chemotherapy along with ONYX-015. The primary endpoint will be progression-free survival and durable tumor responses. Secondary endpoints will include quality-of-life measurements and overall survival. (See BioWorld Today, Sept. 8, 1999, p. 1.)

In Phase II trials, 16 out of the 26 patients had tumor regression greater than 50 percent, with six having complete regression. The overall response rate was 62 percent and the complete response rate was 23 percent, compared to 35 percent and less than 10 percent, respectively, that would be expected in patients only given standard chemotherapy. (See BioWorld Today, Nov. 24, 1998, p. 1.)

Onyx also is testing the oncolytic virus in early Phase II studies in pancreatic cancer and colorectal cancer that has metastasized to the liver. It is also exploring its potential in preventing the preneoplastic conditions of Barrett's esophagus and oral leukoplakis from turning into cancer.

The association between the two companies dates back to 1995 when Warner-Lambert signed a three-year deal worth up to $25 million related to cell-cycle regulation. This year the pact was extended another three years, giving Onyx $25 million, plus additional milestones. (See BioWorld Today, May 15, 1995, p. 1; and Jan. 16, 1998, p. 1.)

A second collaboration came in 1997 when a three-year deal was signed to research and develop new therapeutics to regulate inflammation and autoimmunity. Prior to commercialization, that deal could total nearly $30 million. That deal also was recently extended, Renton said. (See BioWorld Today, Aug. 14, 1997, p. 1.)

"In both of those deals we have identified the lead compounds and they are undergoing chemical optimization by chemists at Parke-Davis," Renton said. "We try to do a deal with Warner-Lambert every two years."

Parke-Davis is the pharmaceutical research division of Warner-Lambert.

Onyx's stock (NASDAQ:ONXX) closed Monday at $8.875, up 25 cents.