Genzyme Corp. acquired German company Verigen AG in a deal worth up to $50 million and one that gives Genzyme a second-generation cartilage repair product.

Verigen's cell therapy product, Matrix-induced Autologous Chondrocyte Implantation (MACI), is sold in Europe and Australia, areas in which Genzyme will take over the marketing responsibilities.

Cambridge, Mass.-based Genzyme intends to bring the product to the U.S.

"Now that we have some access to the data, we will have a dialogue with the FDA," said Ann Merrifield, president of Genzyme Biosurgery. "We hope to start clinical trials early in 2006."

Merrifield said her company was evaluating a number of options to advance its global orthopedic franchise, and Verigen met the criteria.

"Of all the options we evaluated, this was the best and it was available," Merrifield told BioWorld Today.

Terms of the transaction include a $10 million initial payment from Genzyme to Leverkusen, Germany-based Verigen, as well as potential development and commercial milestone payments of up to $40 million over the next six years. The milestones are based on the approval of a biologics license application in the U.S., marketing approval in the U.S. and eventual sales levels.

Genzyme already has acquired about 96 percent of Verigen's shares, and it plans to acquire the rest in the first half of this year.

By acquiring Verigen, Genzyme gains cell culture facilities in Europe and Australia to support sales in those territories. Genzyme already has a sales force in those areas to market its product Synvisc, for pain from osteoarthritis of the knee. About 65 employees come with the Verigen acquisition and initially all will remain with Genzyme.

"We'll make decisions after we have a chance to evaluate how they fit into our commercial structure in Europe," said Dan Quinn, Genzyme's spokesman, "but our intent is to continue operations as they were."

With U.S. clinical trials starting in 2006, MACI would represent a second-generation product, following Genzyme's Carticel (autologous cultured chondrocytes), which was introduced in the U.S. in 1995 and FDA approved in 1997. Carticel is not marketed in Europe or Australia. Annual U.S. sales of Carticel are about $20 million.

"Carticel has been a tremendous success clinically," Merrifield said. "Data show the healing is good and lasts a long time."

MACI, however, offers a more convenient method of delivery than the traditional autologous chondrocyte implantation method used with Carticel. Both procedures begin when an orthopedic surgeon harvests a biopsy of healthy cartilage from a patient's knee and sends it to a cell-processing facility. Technicians grow millions of new cells that later are implanted into the patient's defect, where they produce new cartilage.

"Currently, suturing is done to hold the cells in place with the Carticel procedure," Quinn said. "That would not be necessary with MACI."

With MACI, technicians seed the patient's cells onto a collagen membrane, which is fitted by a surgeon and can be secured without suturing. Since it was first offered in 1998, the product has been delivered to more than 3,200 patients in Europe and Australia.

Aside from Carticel and MACI, Genzyme manufactures Epicel (cultured epidermal autografts), a cell therapy for treating patients with severe burns. The company also is conducting cell therapy research into treatments for heart disease. A Phase II trial is enrolling 300 patients in Europe to determine whether cell therapy can be used to reverse damage done to cardiac muscle following a heart attack, or to safely halt progression of heart failure.

Genzyme's stock (NASDAQ:GENZ) rose 8 cents Tuesday to close at $60.71.

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