West Coast Editor

Looking to boost the value of its recent cancer deal with XOMA Ltd., Chiron Corp. is acquiring Sagres Discovery Inc. for undisclosed terms.

"It provides us with a bin full of new targets we'll be able to move forward through the collaboration with XOMA," said John Gallagher, media relations manager for Emeryville, Calif.-based Chiron.

The company's stock (NASDAQ:CHIR) closed Tuesday at $43.69, down 71 cents.

Chiron and XOMA, of Berkeley, Calif., this spring entered a worldwide exclusive agreement focused on cancer antibodies. As Chiron uses its genomics platform to generate functionally validated targets for small-molecule drugs, therapeutic antibodies and vaccines, XOMA's job is to come up with antibodies against the targets and accelerate them through development. The deal with Sagres, of Davis, Calif., means more kinases and more antibodies. (See BioWorld Today, March 3, 2003.)

"We'll be integrating the [Sagres] staff into our staff," Gallagher told BioWorld Today. However, senior executives will not be brought along but will stay on as consultants to Chiron. Gallagher was uncertain how many employees privately held Sagres has.

The company is focused on what it calls the Oncogenome, a set of oncology targets from cryopreserved, retroviral-induced mouse tumors. Combining gene isolation and in vivo validation into a single high-throughput process, Sagres is able to figure out which genes cause disease and which affect or respond to it.

In recent months, Sagres also reportedly had been seeking a buyer after a financing deal fell through. But times were better in early 2003, when the firm drew the attention of Boehringer Ingelheim International GmbH, of Ingelheim, Germany, which entered a research deal with Sagres for undisclosed terms. Later the same year, Sagres conducted an acquisition of its own, buying out San Diego-based MemRx Corp., a crystallization and structure-based drug discovery company, in an all-stock deal. (See BioWorld Today, Jan. 10, 2003, and April 4, 2003.)

Chiron, for its part, suffered a setback in March when its nucleoside analogue for gastroesophageal cancer, tezacitabine, failed to meet expectations in a Phase II trial. The firm stopped development of the drug, which was acquired in the buyout of Fremont, Calif.-based Matrix Pharmaceuticals Inc. a year ago. (See BioWorld Today, March 22, 2004.)

But the company's main cancer program is marching on. Last month, Chiron started a new Phase II study of Proleukin interleukin-2 plus rituximab in rituximab-naive patients with low-grade non-Hodgkin's lymphoma.

Meanwhile, the company's first-quarter earnings fell 36 percent, compared to those in the same period last year, partly due to the way income from its flu vaccine is recorded and partly because of less royalty cash from Betaseron, the interferon beta-1b drug for multiple sclerosis, which is sold by Montville, N.J.-based Berlex Laboratories Inc.

The deal might have been a saving grace for Sagres, but what about Chiron? Gallagher said he had not heard anyone suggest the time might not be right for the firm to make an acquisition, given the less-than-robust financial report.

"We've said since the beginning of the year that we have an investment agenda for long-term value creation, and certainly having a wealth of targets [from Sagres] that we can move forward in development fits with that agenda," he said.

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