By Kim Coghill

Washington Editor

Two German companies looking to expand product development opportunities in their respective areas of research said Thursday they intend to merge with American firms.

MediGene AG, of Martinsreid, Germany, will acquire San Diego-based NeuroVir Therapeutics Inc., maker of herpes simplex virus (HSV) vectors for use as cancer therapeutics. The all-stock deal is valued at about $77 million based on MediGene's closing price Thursday. With the acquisition, MediGene, already strong in cardiology, will further strengthen its oncology franchise.

Meanwhile, Erkrath, Germany-based Cardiogene AG in late October completed the final stages of its merger with Cincinnati-based Intracardia Inc. The new company, now called Cardion AG, will pursue products in heart disease and cell transplantation.

Officials at Cardiogene and Intracardia, both private companies, would not disclose financial details about the merger except to say it was a stock-for-stock transaction, with Cardion acquiring 100 percent of the stock. The transaction leaves Intracardia shareholders as minority owners in Cardion.

MediGene AG will acquire privately held NeuroVir, formerly based in Vancouver, in a stock-for-stock transaction. Between 996,631 and 1,009,000 new MediGene shares will be issued, with an exclusion of pre-emptive rights of existing shareholders, to NeuroVir's shareholders in exchange of the approximately 91 percent of shares on a fully diluted basis that MediGene does not already own.

MediGene Increases Pipeline To Five Products

The acquisition of NeuroVir will increase MediGene's product candidates in clinical development from three to five, and add more than $500 million in peak sales potential to the company's existing $1 billion.

NeuroVir's oncolytic HSV technology is based on the ability of herpes simplex viruses to infect and kill a wide range of tumor cells, including certain cells that are resistant to chemotherapy and radiation.

NeuroVir has two products in clinical trials. The first is G207, a potential therapy for malignant brain tumors including glioblastoma and brain metastases. Phase II trials are expected to begin in 2001, according to a statement released by MediGene.

The second product, NV1020, is a locoregional therapy for colorectal cancer that has metastasized to the liver. The Phase I/II clinical study at Memorial Sloan-Kettering Medical Center in New York is ongoing.

According to a prepared statement by Peter Heinrich, MediGene CEO, the transaction will help MediGene establish a foothold in the United States by giving it access to the scientific community and job market, and it creates a bridgehead for a future sales force here. "The acquisition moves MediGene into the league of major international biotech players in oncology," he said.

Frank Tufaro, NeuroVir CEO, said, "We are pleased to be joining forces with one of Europe's most prominent biotech companies. Our oncolytic HSV and HSV amplicon technologies with strong patent protection will ideally complement MediGene's viral vectors and virus-like particles. Furthermore, our experience with the FDA as well as synergies in process and analytical development deriving from the merger could facilitate the time to market for the combined companies."

MediGene's lead compound, Etomoxir, is designed to inhibit carnitine palmitoyl-transferase 1, an enzyme involved in mitochondrial fatty acid oxidation, for congestive heart failure. Etomoxir has undergone Phase I/II clinical studies.

Cardiogene Strengthens Gene-Based Technologies

The creation of Cardion combines Cardiogene's core local gene therapy platform with Intracardia's strengths in stem cell differentiation and graft enhancement, according to Steve Gailar, former president of Intracardia and group director, Venture Projects, Sentron Medical. Intracardia was a division of Sentron Medical.

Cardion's corporate headquarters will remain in Erkrath, while the U.S. operation will be moved to Boston.

Cardion will possess nonviral local gene-based products developed by Cardiogene, to reprogram damaged tissue in situ for the treatment of cardiovascular disorders. Using a proprietary "plug and play" gene delivery system comprised of a liposomal formulation and catheter technology, therapeutic genes can be safely and efficiently delivered to the blood vessel wall and heart tissue, the company said

The new company's immediate charge will be to guide two innovative products through clinical development.

Gailar said NoStentin, a local nonviral gene therapy product for the prevention of restenosis, is expected to enter clinical trials before the end of 2000 or in early 2001.

Another product, Cardioprotectin, a stem cell-based approach for regeneration of heart tissue in the myocardial infarction setting, is in the late research to early preclinical stage.

Intracardia, formed in 1999, is the outgrowth of technology developed by Loren Field of Indiana University. The technology allows the differentiation/selection of stem cells into replacement cells and is expected to emerge as a vehicle for ensuring safety in the clinical application of stem cell technology.

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