By Mary Welch

In a deal potentially worth up to $65.5 million, Magainin Pharmaceuticals Inc. and Genentech Inc. will co-develop an antibody to interleukin-9 (IL-9) for asthma, with options covering other respiratory disease products.

The stock market certainly appreciated the deal, sending Magainin's stock (NASDAQ:MAGN) up 49 percent Monday, to $4.562. Genentech (NYSE:DNA) closed Monday at $124.25, up $4.25.

Under terms of the collaboration, Genentech will make an initial purchase of $5.5 million in Magainin equity. According to Michael Dougherty, Magainin's president and CEO, the equity, purchased as premium, represents less than 5 percent of the company.

In addition, Magainin, which is based in Plymouth Meeting, Pa., could potentially receive up to $60 million in milestone payments and development funding for the first product. Additional products could generate extra milestone payments and development funding.

"We had three primary objectives in this collaboration," Dougherty said. "We wanted to participate in the commercialization profits. We wanted to participate in the research and development being conducted in both the preclinical and early clinical stages. And we wanted to bring capital into the company. We did all three of those objectives."

The two companies will jointly conduct preclinical and early clinical development through Phase II. South San Francisco-based Genentech will take over for Phase III clinical testing, manufacturing and marketing. However, Magainin has the option to co-fund Genentech's Phase III work and regulatory filing expenses in return for a share of U.S. profits.

"If we exercise that option, we participate in the commercialization profits," Dougherty said. "If we don't, then we receive royalties on sales."

If Magainin opts to co-fund late-stage development, it may do so by selling convertible preferred equity securities.

The two companies entered into a research and option partnership early last year to evaluate an antibody against IL-9 as a potential asthma therapy. Genentech purchased $2 million in Magainin stock at a premium and agreed to pay up to $35 million to Magainin if it decided to pursue development. (See BioWorld Today, Jan. 8, 1999, p. 1.)

The new deal supercedes the original one, Dougherty said.

"We worked together in the area of blocking antibodies to IL-9, and that has led to the collaboration," said Roy Levitt, Magainin's chief operating officer. "We think this is the proper way to intervene and we are near our proof of concept. Obviously, Genentech feels similarly, because this is a substantial commitment for a product that is still in the preclinical stage. That is very reassuring to us. This product could be a very large one."

Levitt said the IL-9 compound could enter Phase I trials in the next two years and complete all of its clinical trials within the next five to six years."

In addition, Genentech has become the first subscriber to Magainin's Respiratory Gene Database, which contains the company's proprietary respiratory disease targets. The database consists of a library of genes that contain additional novel, well-validated therapeutic targets relevant to a variety of respiratory diseases. The database may be one of the most extensive proprietary databases focused on allergic respiratory disease in academia or industry, the company said.

"This deal gives Genentech access to our database of targets that have been validated in respiratory diseases," said Levitt. "This could lead to further product development with Genentech. The compounds could be small- molecule compounds or proteins."

Magainin's asthma program dates back to 1996, when Levitt, a molecular geneticist, joined the company with research he brought from Johns Hopkins University. His preclinical data supporting the role of IL-9 and genes in its pathway in asthma have been widely published in scientific journals. (See BioWorld Today, Nov. 25, 1997, p. 1.)

Asthma cuts off, or cuts down, intake of air into the lungs. At the root of the airway constriction is inflammation of the bronchial tubes. Asthma symptoms include shortness of breath, coughing and chest tightness.

Studies in transgenic mice have shown that overproduction of IL-9 increases levels of bronchial hyperresponsivenes (BHR), lung eosinophilia and serum immunoglobulin E - all considered asthma risk factors - in response to antigens. 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 BHR.