By Brady Huggett

Magainin Pharmaceuticals Inc. got a surprise Monday - the termination of its interleukin-9 license and collaboration agreement with Genentech Inc.

"This is sudden and unexpected," said Roy Levitt, president and CEO of Magainin. "I've had a hard time getting with [Genentech] upper management, but I believe they have had shifting priorities and this was not a priority so they are giving it back."

"We did a year-end review of our research programs and this program did not meet our priority threshold," said Sabrina Johnson, director of corporate communications at Genentech.

The deal, originally signed in late April with a potential worth of $65.5 million to Magainin, was for the co-development of an antibody to IL-9 for asthma, with options for other respiratory diseases. All licensed technology under the agreement will be returned to Magainin. (See BioWorld Today, May 2, 2000.)

Genentech made an up-front $5.5 million equity investment in Magainin upon the deal's close. Further payments were not disclosed.

For Magainin, Levitt said, although the move came suddenly, there is a silver lining.

"Ideally, this is what we want [Genentech] to do," Levitt told BioWorld Today. "If they can't be committed to it, then we want it back. I would underscore that there have been several publications that have supported IL-9's role in asthma. We think the science speaks for itself and we think it's a very valuable asset."

Magainin, of Plymouth Meeting, Pa., aims its efforts at anti-angiogenesis, respiratory and infectious disease. It has two technology platforms: research and development derived from the host-defense system of animals, and genomic techniques focused on identifying genes linked to asthma and allergies.

Studies in transgenic mice have shown that overproduction of IL-9 increases asthma risk factors. Linkage studies in humans have shown the connection between a genetic marker located near the IL-9 receptor and the presence of asthma and/or bronchial hyperresponsiveness. Levitt said if Genentech doesn't want in on IL-9, others do.

"We had a lot of interest in the program before we agreed with Genentech," he said. "Our decision to go with Genentech was based on that they are one of the premiere antibody development companies. But we think there are some outstanding companies out there that can be a good partner for us."

Genentech, of South San Francisco, still is obligated to fund the program for another six months, giving Magainin a window to repartner.

"[Genentech] does have funding obligations, but we would expect that we would be partnered in the next six months," Levitt said. "I would say there is no question about that." He added that in the unlikely situation that Magainin can't attract a partner, the program will be continued regardless because the company believes in it.

On news of the agreement termination, Magainin's stock (NASDAQ:MAGN) fell 46.8 cents Monday, or about 14 percent, to $2.906. Levitt said that seemed about right.

"We were supported very effectively and completely, but this was an early program," he said. "So, it shouldn't have a huge effect on our valuation. Actually, when we repartner it there could be a tremendous upside."

As of Sept. 30, Magainin had about $22 million in cash, Levitt said, with a burn rate of around $800,000 a month, funds for at least a year.

Besides IL-9, Magainin has aminosterols, such as MSI-1432 and, further along, squalamine. Squalamine is in Phase II for non-small-cell lung cancer in combination with paclitaxel and carboplatin.

Magainin's antibiotic cream for diabetic foot ulcers, Locilex, part of its peptides program, was not approved in July 1999 and Magainin is deciding whether to continue the program or not. (See BioWorld Today, July 27, 1999.)

Magainin also is researching defensins, host-defense molecules, identified in the lungs, gastrointestinal tract and skin. Levitt said Magainin also is working on a compound that may treat many effects of cystic fibrosis, although that still needs to be proved in tests. IL-9 is just a part of the larger Magainin picture, he said.

"This is an excellent opportunity for us," Levitt said. "We have a rich pipeline that is diverse. This company has a tremendous opportunity to move forward in the next year." n