Quest Diagnostics Inc. took a 17 percent stake in Ciphergen Biosystems Inc. as part of a strategic alliance to develop and commercialize proteomic diagnostic tests based on Ciphergen's SELDI ProteinChip technology.

The three-year alliance will focus on commercializing selected assays from Ciphergen's pipeline. The tests should help to improve patient care. Ciphergen has spent the last couple of years discovering biomarkers and turning them into assays.

"Now we'll have a distribution network and a partner that can help us bring those to the clinic and to the physicians and to the patients," said Gail Page, Ciphergen's executive vice president and president of the diagnostics division.

All told, the deal is worth $25 million for Fremont, Calif.-based Ciphergen. A total of $15 million will come from Quest's purchase of 6.2 million shares of Ciphergen - about a 17 percent stake in the company - and of five-year warrants to buy an additional 2.2 million shares for $3.50 apiece. Before the agreement, Ciphergen had about 29.5 million shares outstanding.

The remaining $10 million will come to Ciphergen in the form of a loan from Lyndhurst, N.J.-based Quest to fund certain development activities. The loan would be forgiven if Ciphergen achieves certain undisclosed milestones.

"I think the milestones are something that we all agreed upon," Page said, "and we think they're very achievable."

Page would not disclose the milestones themselves, but she did say that Ciphergen expects to have its first test on the market in early 2006.

Ciphergen's stock climbed more than 21 percent in August 2004 when its technology was used to discover three protein biomarkers that form the basis of a clinical assay designed to detect Stage I/II ovarian cancer. The markers were a processed version of ITIH4, a truncated form of transthyretin and apolipoprotein A1. (See BioWorld Today, Aug. 17, 2004.)

Ciphergen and Quest would not disclose the specific assays included in their agreement, but Page said the assay for ovarian cancer is one that would be "interesting to an organization like Quest." Quest, which is considered the world's largest reference laboratory, offers the broadest access to diagnostic testing services through its network of laboratories and patient service centers.

Women who are diagnosed with ovarian cancer at Stage I or II have a 90 percent survival rate. It is a market of 10 million women that Ciphergen expects to target with its test.

"If you think about the market today," Page said, "there is no test for the early stage detection of ovarian cancer. By the time a woman presents with symptoms and goes to a physician, it's diagnosed in Stage III and IV, when survival is slim. We want to move the woman up the curve."

In addition to finding a test to differentiate a benign pelvic mass from a cancer, Ciphergen's technology also has shown potential in monitoring therapy.

"We can tell whether the patient is responding or not responding to therapy," Page said.

Ciphergen has about "four or five tests that we feel are our lead horses," she said, noting that typical diagnostics deals center on only one test. In contrast, Quest will work with Ciphergen on cultivating its pipeline, taking various assays from it and commercializing them. Ciphergen primarily focuses on diagnostics for oncology, Alzheimer's disease, and cardiovascular conditions, but it also has done some work in the fields of infectious disease.

Ciphergen is made up of two divisions, one focused on diagnostics and the other focused on biosystems. The diagnostics division provides research and development services through its Biomarker Discovery Centers located in Japan; Denmark; Fremont, Calif.; and Malvern, Pa.

The biosystems division develops, manufactures and markets SELDI (surface-enhanced laser desorption/ionization) ProteinChip systems and services for various proteomics applications. The systems enable protein discovery, characterization, identification and assay development to provide researchers with predictive, multi-marker assay capabilities and a better understanding of biological function at the protein level.

For example, Ciphergen signed an agreement in June with Bayer Pharmaceuticals Corp., of West Haven, Conn., to concentrate on identifying biomarkers and developing an assay that may be used in a clinical trial in cancer.

Ciphergen's stock (NASDAQ:CIPH) rose 12 cents Friday to close at $2.06. Quest's stock (NYSE:DGX) rose 11 cents, to close at $51.62.

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