By Debbie Strickland

Staff Writer

Genzyme Corp. has pledged $33 million to aid corporate cousin Genzyme Transgenics Corp.'s quest to milk from transgenic goats a human protein that regulates blood clotting.

The two Genzyme relations are forming a joint venture to produce from goat's milk the plasma protein antithrombin (ATIII). The current potential worldwide market for the drug is $200 million, analysts estimate.

Under terms of the agreement, Genzyme, of Cambridge, Mass., will provide 70 percent of the development costs, up to a maximum contribution of $33 million. Framingham, Mass.-based Genzyme Transgenics will fund the other 30 percent of those costs. The companies will share equally any costs that exceed that level.

Both will contribute manufacturing, marketing and other resources to the venture -- an unnamed virtual company — at cost, and will own the company on a 50-50 basis, splitting profits from product sales equally. The agreement includes possible milestone payments from Genzyme to Genzyme Transgenics upon approval by the FDA.

The deal is "positive news for Genzyme Transgenics," wrote analyst Mary Ann Gray, of Dillon, Read & Co. Inc., in New York. "It covers a large population with the backing of a substantial marketing partner, and provides favorable marketing terms."

All territories are covered except Asia, where marketing rights belong to SMI Genzyme Ltd., a joint venture between Genzyme Transgenics and Sumitomo Metals Inc., of Osaka, Japan.

Plasma-derived ATIII is already on the market to treat hereditary deficiency in the U.S. In Europe and Japan, it is approved for acquired ATIII deficiencies resulting from a variety of causes, including liver diseases, disseminated intravascular coagulation, hip and knee replacement, and other surgical procedures.

Transgenic proteins are produced by inserting human DNA into animals' cells so that the targeted protein is secreted in the milk of female offspring. Genzyme Transgenics produces ATIII in the milk of transgenic goats at a 168-acre facility in central Massachusetts.

The analysts and the companies agree that transgenic ATIII could offer a safer alternative to the plasma-derived product.

"There are all kinds of diseases people have in their blood, and when you're getting blood plasma products, there is a risk of transmitting diseases," said Cheryl Greenhouse, a Genzyme spokeswoman. "It's believed that transgenic ATIII is safer because it's not derived from human blood, but from the milk of goats."

The new product could ultimately replace plasma-derived ATIII, the companies said.

Genzyme began funding transgenic ATIII during an option period that began in 1996. The product has since successfully passed preclinical safety studies and a Phase I clinical trial.

Data are under analysis from a completed Phase II trial on patients receiving coronary artery bypass grafting (CABG). Use in conjunction with the CABG procedure would be a new indication for ATIII in the U.S.

Some 400,000 such procedures are performed each year in the U.S., according to Peter Drake, executive vice president and analyst at Vector Securities International Inc., of Deerfield, Ill.

"In theory, improved anticoagulation in CABG patients who are on the bypass pump may decrease the need for additional blood transfusions," wrote Drake in a report on the new venture. "By increasing ATIII levels, the heparin response should be improved without increasing the incidence of post-surgical complications."

Shares of Genzyme Transgenics (NASDAQ:GZTC), which is 43 percent owned by Genzyme Corp., closed Tuesday at $8.875, up $0.375. Genzyme (NASDAQ:GENZ) finished the day at $26.75, up $0.625. *