By Randall Osborne

West Coast Editor

Payoff time grew nearer for Human Genome Sciences Inc., in a deal made more than four years ago with Schering-Plough Corp., as the latter said it will develop and commercialize a new type of interferon discovered by HGS.

The July 1996 therapeutic collaboration and license agreement was valued at $55 million and granted Schering-Plough, of Philadelphia, an option to advance two of HGS' therapeutic proteins. (See BioWorld Today, July 3, 1996, p. 1.)

"There are some product-sharing rights" in the agreement, said William Haseltine, chairman and CEO of Rockville, Md.-based HGS. "However, there is one circumstance in which Schering-Plough can assume all rights, and that is if HGS decides to outlicense one of the proteins prior to Phase II. We had done preclinical work to demonstrate [the new interferon] is likely to be an interesting drug, and we decided our pipeline was too full to develop it ourselves."

The protein is "the first one that one of our partners has chosen," Haseltine said. Schering-Plough will pay clinical development milestones to HGS, along with royalties, which Haseltine described as "healthy . . . well in excess of genomics-type deals, and very substantial." He declined to disclose further details.

HGS' interferon has potential application in autoimmune disease, infectious conditions and cancer. "We made the protein, showed it was active and conducted a number of preclinical experiments," Haseltine said.

The move by Schering-Plough is "a little like putting a child up for adoption," Haseltine told BioWorld Today. "We have a very rich pipeline, and this forces us to make hard choices as to which ones we develop internally and which ones we outlicense."

Haseltine declined to comment on whether Schering-Plough has another protein in mind, saying only that Schering-Plough has ample time to decide and that the protein must be a protein or antibody drug "that we initiated work on prior to 2001, which, of course, is all the proteins and antibody drugs we're working on."

One more payment remains in the 1996 deal, which is "renewable, on non-exclusive terms for small-molecule discovery only," Haseltine said.

Also in 1996, HGS negotiated a renewable agreement with Schering-Plough for development of gene therapies based on the genomics data, he said. Schering-Plough paid for a non-exclusive license to the gene sequence data bases, and an option to buy exclusive rights to genes selected for a gene therapy product.

With drug leads aplenty, HGS and corporate partner SmithKline Beecham plc, of London, entered database deals that year not only with Schering-Plough, but also with French drug maker Synthelabo S.A. and Merck KGaA, of Darmstadt, Germany.

Going strong with peptides and proteins, the well-capitalized HGS last month acquired Principia Pharmaceuticals and its fusion protein technology in a stock swap valued at $120 million, after filing the same month a $1 billion universal shelf registration that covers various financing vehicles, including convertible debt, preferred and common stock, and warrants to buy common stock. (See BioWorld Today, Sept. 8, 2000; and Sept. 12, 2000.)

As Schering-Plough's selection of the protein opens the door to a new realm of opportunity and decision making for HGS, Haseltine said, it reflects the success of the firm's original plan to make money from such collaborations with as little risk as possible.

"This is what the partnerships were meant to do," he said. HGS' stock (NASDAQ:HGSI) closed Monday at $82.187, up $3.625.

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