Completing its planned exit from small-molecule development, Celera Genomics sold its cathepsin S inhibitor program to Schering AG in a deal worth up to $365 million.

In a separate transaction, the Rockville, Md.-based company also divested an undisclosed preclinical program to an undisclosed investor for $250,000 up front, a 5 percent equity stake in a new company to develop the product, and up to $15 million in potential payments based on development and approval milestone achievements.

Celera Genomics' plan to sell off the assets was disclosed early this year.

"In January, we announced that we were acquiring the 50 percent ownership of Celera Diagnostics that [parent company] Applied Biosystems had," said David Speechly, Celera Genomics' senior director of investor relations and corporate communications.

As a result of the transaction, Celera found itself armed with three strategic assets in the areas of diagnostics, proteomics and small molecules.

While the small-molecule business produced two compounds that moved into the clinic in 2005, "it was also very expensive to do all of that work," Speechly told BioWorld Today, "and Celera's core objective is to have high growth and move toward profitability as quickly as possible."

The company expects to announce its profitability plan at an analyst day scheduled for today in New York. The diagnostics business for which Celera has a 50/50 profit-sharing alliance with Abbott Laboratories, of Abbott Park, Ill., had end-user sales of $61.7 million in fiscal year 2005. Speechly said guidance for fiscal year 2006, which ends next week, is about $75 million to $85 million for the business.

The cathepsin S inhibitor program includes the lead candidate, CRA-028129, which entered Phase I development last September. The single-center study is being conducted in Christchurch, New Zealand, and the product is designed to treat psoriasis.

Schering's interest is in "autoimmune disease, of which multiple sclerosis is an important part," Speechly said. It plans to develop CRA-028129 initially for multiple sclerosis, adding to an existing Phase III program exploring high-dose interferon beta-1b and a Phase II program for alemtuzumab in MS.

For the product, Berlin-based Schering is paying $5 million up front in cash - half upon closing of the agreement and the rest upon the successful transfer of the assets within four months.

If the program meets all developmental and commercial milestones in key markets, Celera could receive up to $360 million more. The company also is entitled to low-double-digit royalties on annual sales of the drugs marketed from the program.

For the undisclosed early stage preclinical small-molecule program sold to a venture capital investor, Celera will receive single-digit royalties on sales of any drugs commercialized.

The name of the new company that will develop that program has not been disclosed.

The cathepsin S inhibitor and preclinical small-molecule programs mark the fifth and sixth programs - and, notably, the last small-molecule programs - to be divested this year by Celera. In April, the company sold three small-molecule programs to Pharmacyclics Inc., of Sunnyvale, Calif., in a deal worth up to $150 million in up-front, equity and milestone payments.

Those assets included an HDAC inhibitor in Phase I trials for refractory solid tumors and an HDAC-8 selective inhibitor in preclinical development for cancer; a Factor VIIa inhibitor targeting a tumor-signaling pathway involved in angiogenesis, tumor cell growth and metastases, and with potential applications in anticoagulation and cardiology; and B-cell-associated tyrosine kinase inhibitors that could be used in lymphoma and autoimmune diseases. (See BioWorld Today, April 11, 2006.)

The potential milestone payments from Schering for the cathepsin S inhibitor program are more than double those disclosed in the sale of the three programs to Pharmacyclics. Speechly explained that CRA-028129 is one of few capsaicin S inhibitors being studied in autoimmune disease, and possibly the only one being investigated for psoriasis.

"If you start getting that sort of differentiation and competitive advantage, it plays right into Schering's strength in MS," he said.

With the small-molecule business divested, Celera now intends to focus on its genomics and proteomics discovery platforms in which it develops molecular diagnostic products and identifies and validates drug targets.

Celera's stock (NYSE:CRA) rose 42 cents Wednesday to close at $11.17.

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