Medical Device Daily Associate Managing Editor

Edwards Lifesciences (Irvine, California) and Sangamo BioSciences (Richmond, California) jointly reported that the companies have entered an agreement in which Sangamo will acquire Edwards’ angiogenesis program for about 1 million Sangamo common shares valued at about $7.5 million.

Edwards also will receive royalties on certain products commercialized in the future, based upon its zinc finger protein (ZFP) activation of the vascular endothelial growth factor (VEGF) gene. These royalities are valued at up to $100 million.

The transaction is expected to be completed by Dec. 31.

The Edwards program was originally initiated in 2000 in collaboration with and under license from Sangamo using its zinc finger protein (ZFP) platform.

In January of 2000 Edwards, then a division of Baxter International (Deerfield, Illinois), entered into an exclusive license and research funding agreement with Sangamo to develop and commercialize VEGF-ZFP therapeutics for the treatment and prevention of ischemic cardiovascular and peripheral vascular diseases. Edwards completed pre-clinical efficacy and toxicology studies and initiated a Phase 1 clinical trial in June of 2004 for EW-A-401, a drug based on the VEGF-ZFP transcription factor and designed to treat critical limb ischemia (CLI) as well as intermittent claudication, both painful and limiting conditions of vascular disease.

Edwards has stated that early results from the CLI trial have been encouraging and has submitted to the FDA to begin a randomized, placebo-controlled, repeat-dosing Phase 2 clinical trial in patients with CLI.

Independently, Sangamo has initiated clinical trials in diabetic neuropathy with a VEGF-ZFP therapeutic known as SB-509. SB-509 and EW-A-401 are nearly identical in design and function. Sangamo recently reported that it has initiated a multi-center, double-blind, placebo-controlled, repeat-dosing Phase 2 clinical trial in patients with diabetic neuropathy.

“This agreement provides for the kind of focused, coordinated development of our respective ZFP programs that we believe will optimize product and commercial success in these patients,” said Don Bobo, Jr., Edwards Lifesciences’ vice president, general manager Percutaneous Valve Interventions, during a conference call on the sale. He added that the deal “fully resolves the disagreements between our two companies regarding the scope of our license and respective rights from Sangamo.

Additionally, Bobo noted that the transfer of these assets allows these important programs to continue under Sangamo’s stewardship and frees up additional Edwards’ resources to drive R&D priorities more central to our strategy.

With the deal, Edwards now owns roughly 1.8 million shares in Sangamo, with the earlier shares acquired through the 2000 licensing agreement.

Edward Lanphier, founder and president/CEO of Sangamo, said during the conference call that enabling the deal as an all-stock transaction was very important to the company since it conserves the company’s cash “in order to have the resources available to fund the most promising clinical programs.”

Lanphier said that if Sangamo or a partner is successful in commercializing a VEGF-ZFP product for ischemic cardiovascular and peripheral vascular diseases or diabetic neuropathy, Edwards will receive a royalty on the greater of 5% of net sales sold by Sangamo or a Sangamo sub-licensee or 25% of the royalty payment received by Sangamo from its sub-licensee.

The maximum amount of royalties that Edwards will receive will not exceed $20 million in a given calendar year or $100 million in the aggregate.

“We really wanted these programs,” said Lanpheir. “In addition to acquiring two clinical stage programs in peripheral vascular disease and a late-stage preclinical program in ischemic heart disease, this agreement will have a significant impact on Sangamo’s future corporate partnering opportunities involving VEGF-ZFP therapeutic programs.”

In response to a question from an analyst, Bobo assured investors that the company was not “walking away” from the angiogenesis program.

“We retained a significant economic interest in the success of Sangamo and the programs, and we’re very confident that under the one roof [of Sangamo] these programs will be prosecuted as fast as possible in the clinic,” he said.

Bobo estimated that the company has invested from $35 million to $40 million in the angiogenesis program over the past five years.

In other dealmaking news:

• Ellex Medical Lasers (Adelaide, Australia), a maker of ophthalmic laser systems, reported that it has acquired Innovative Imaging (II; Sacramento, California), a maker of ophthalmic diagnostic ultrasound systems.

Ellex made a base payment of $1 million for the business, and it will make an annual payment in each of the first three years, based on the performance of the business. The initial payment will be financed from Ellex’s existing credit facility and Ellex expects the acquisition to be earnings per share accretive this financial year.

Ellex said that II’s I3 System is considered the “gold standard” for diagnostic ultrasound in ophthalmology, especially among retinal specialists in the U.S. Worldwide, more than 1,300 systems are in use. II reported that it generated revenue of $2.3 million in 2005.

With the acquisition, Athy Kalatzis, VP of business development at Ellex, has assumed the role of general manager of II. The company’s current headquarters in Sacramento will continue to operate as an engineering and manufacturing center focused on the I3 System, and the I3 sales and service support network will remain unchanged.

II founder Rainer Nikel and shareholder Cynthia Kendall have agreed to continue with the business for at least three years, along with a number of other key employees.

• Neuroptix (Acton, Massachusetts) and Merck & Co. (Whitehouse, New Jersey) reported that they have established a research collaboration in which Merck will evaluate Neuroptix’s diagnostic technology in preclinical models of Alzheimer’s disease and clinical trial monitoring of potential new Alzheimer’s drugs.

Neuroptix will receive an upfront payment – the amount undisclosed — annual technology access fees and payments based on milestones. Neuroptix will also receive payments for instruments, diagnostic agents and services. Merck receives a non-exclusive license to use Neuroptix’s technology for preclinical and clinical research purposes.

Neuroptix will provide Merck with access to its Neuroptix QEL laser eye scanning device, which in preclinical studies in mice has detected Alzheimer’s-related amyloid protein aggregates in the lens of the eye. The amyloid protein aggregates are a surrogate biomarker of beta amyloid in the brain.

“We are hopeful that the activities under the agreement will demonstrate the potential of this novel, non-invasive technology for measuring beta amyloid, a biomarker of Alzheimer’s disease,” said Merv Turner, PhD, senior vice president of Worldwide Licensing and External Research at Merck.

“Merck is a leader in the development of novel treatments for unmet medical needs, which makes it an ideal partner to help create predictive diagnostic protocols that fully explore the potential of Neuroptix’s technology,” said Paul Hartung, president/CEO of Neuroptix.”