By Brady Huggett

Genencor International Inc. and Epimmune Inc. are beginning a potential $60 million collaboration for the development of vaccines against hepatitis C, hepatitis B and human papillomavirus, a deal Genencor said initially wasn't supposed to happen.

The collaboration is for 30 months, but is extendable. Also, Genencor, of Palo Alto, Calif., exclusively licensed San Diego-based Epimmune's epitope and Padre technologies and related intellectual property rights worldwide. Thirdly, Genencor purchased a 10 percent stake in Epimmune.

The agreement started out as an acquisition idea - Genencor was compiling a list of companies it might like to buy, and Epimmune was on it, said Debby Jo Blank, chief business officer of health care at Genencor.

"We decided to visit Epimmune first because they were in California and were easy to get to," Blank said. "And we were going to use them as a practice run. But we walked out of there scratching our head and saying, 'Gee, they were so good.' And we never really got them out of our head."

But after discovering it couldn't get any one company that had all the pieces it wanted, Genencor began to contemplate collaborations, and Epimmune couldn't be overlooked.

"We decided it was pretty much a must-have, we had to have the technology," Blank said.

Genencor is "in pretty late-stage" negotiations to pick up other technologies it deems important, but it likes the first step it has made.

"[Epimmune's] IT is very strong and they filed really early on some of these epitopes," Blank said. "They are battle scarred. They are savvy about failure and have learned a lot from their failures."

Robert DeVaere, Epimmune's executive vice president of finance and chief financial officer, said teaming up with Genencor at this point carries a certain weight.

"They have the publicly stated objective of moving into the health care area, and this is a first step and it's important for us to be part of that first step," he said. "They are moving forward as they said they would."

How much of the $60 million that is going to Epimmune up front was not disclosed, but Blank pointed to historical deal configurations as a gauge.

"I would say this deal, which we benchmarked against similar deals, is very typical for a late-stage deal," she said. "You see up-front fees that aren't too huge, more than a couple hundred thousand but less than a couple million dollars. If you look at those deals, they have milestones in the $10 million to $15 million range. And they have low- to high-single-digit royalties, and we are sort of in that range."

The companies will attack the hepatitis B virus first, and then progress to HPV. For the hepatitis C virus, Genencor hopes to use its mouse model, which is not yet complete.

"I think in the 18 to 24 month timeframe we plan to get the initial [vaccine] into the clinic," said Robert Chesnut, executive vice president of research and development at Epimmune.

The 10 percent equity stake Genencor acquired, at an undisclosed price per share, makes it the third largest shareholder in Epimmune, following the State of Wisconsin Investment Board and Pharmacia Corp., of Peapack, N.J., respectively. Blank said that percentage could be increased, and with Pharmacia taking less of an interest in vaccines as of late, Genencor could move up that list. Pharmacia ended its collaborative relationship with Epimmune in November after merging with Monsanto Co., of St. Louis. (See BioWorld Today, Nov. 15, 2000.)

"That combined entity decided they weren't a vaccine company and we recovered all the rights to the cancer arena," Chesnut said.

In Genencor, Epimmune has a company that not only likes what it has, but also believes it can improve it.

"It will be a true collaboration to take Epimmune's epitopes and add some things to make them even better, to build upon their technology," Blank said.

Epimmune's stock (NASDAQ:EPMN) rose 9 cents Tuesday to close at $4. It had 10.4 million shares outstanding before the deal, 8.9 million of them common shares and the rest preferred stock. Genencor's stock (NASDAQ:GCOR) dipped 5 cents to close at $15.05.

No Comments