By Mary Welch

In their second collaboration, Isis Pharmaceuticals Inc. and Elan Corp. plc will form a subsidiary of Isis to develop ISIS 14803, an antisense drug to treat patients chronically infected with hepatitis C virus (HCV).

Dublin, Ireland-based Elan will purchase $7.5 million of Isis common stock and possibly an additional $7.5 million worth of stock at a mutually agreed upon milestone.

"The purchase of Isis' common stock by Elan will be at a premium to the stock's price, and we're not disclosing the premium. So we can't say now how many shares they will own as a result of this deal," said Karen Lundstedt, Isis' executive director of investor relations and corporate communications. "The first purchase of stock will take place in the first quarter of this year. Right now we have roughly 30 million shares outstanding."

In addition to the potential $15 million in stock purchases, Elan agreed to make a $12 million line of credit available to Isis to help fund its commitment to the subsidiary. Elan will also purchase Isis Series B preferred stock that will be convertible into either Isis stock or stock in the subsidiary.

The companies will develop Isis' antisense drug while exploring its delivery with Elan's proprietary Medipad drug delivery system, a disposable subcutaneous infusion device. Both companies will license significant technology to the new subsidiary, which will be housed in Isis' Carlsbad, Calif., headquarters. No additional staff is expected to be hired, she added.

ISIS 14803 is an antisense drug that in preclinical trials successfully inhibited HCV replication in mice and cell culture. Isis expects the joint venture will file an investigational new drug application this month.

Elan's Medipad drug delivery system is designed to combine the convenience of a transdermal patch with the drug delivery capabilities of an infusion pump. It can be self-administered, with the drug being infused over 24- and 48-hour time frames.

"This is a significant deal for us," Lundstedt said. "Elan has been a great partner with our oral antisense program and we expect similar results with this one. The delivery systems are different but it's exciting to develop antisense drugs in patient-convenient formulations."

Last March the two companies joined forces to develop oral antisense therapies for a number of diseases. Again, Elan made an equity investment in Isis - to the tune of $27 million. Elan purchased $15 million of Isis stock at a 40 percent premium and agreed to purchase $12 million of convertible exchangeable preferred stock.

"If Elan were to exercise all of their options from both deals, their equity in Isis would be significantly less than 10 percent," Lundstedt said. "It'd be more like 6 percent."

Isis had two other collaborations focusing on HCV. In June 1998, it signed a deal worth up to $50 million with Merck & Co. Inc., of Whitehouse Station, N.J., to develop small molecules that Merck will screen in enzymatic assays to identify hepatitis C replication inhibitors. That program is still in the preclinical phase, Lundstedt said. (See BioWorld Today, June 10, 1998, p. 1.)

A three-year cooperative research agreement with two Japanese companies aimed at developing antisense nucleotides for HCV ended last year with no further work being contemplated, Lundstedt said.

Isis has one approved antisense drug - Vitravene, for the treatment of cytomegalovirus-induced retinitis in AIDS patients, which is given as an intraocular injection. Antisense technology uses small strings of nucleotides to bind to messenger RNA and prevents a cell from producing specific proteins. It offers a very specific way to turn off the expression of certain genes in a cell.

Traditionally one of the problems with antisense drugs is that they have not been able to be formulated as a tablet or capsule.

"We believe this will be a great partnership," Lundstedt said. "We think our antisense drug will be well suited for treating this disease and if we're successful with Elan's delivery systems we'd ultimately want to apply these platforms to other drugs in our pipeline."

Isis' stock (NASDAQ:ISIP) closed Friday at $7.25, up 43.75 cents.