PARIS - Genset has concluded a new gene library agreement with Genetics Institute (GI), a branch of Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products Corp.

The new deal, which replaces the original license and distribution agreement Genset signed with GI in 1997, provides for the Paris-based genomics company to supply GI and Wyeth-Ayerst with a wider range of potential products and targets for use in their internal drug discovery programs.

GI has the option to license up to 1,000 selected sequences and corresponding clones from Genset's library. In addition to initial revenues, Genset will receive product development milestone payments as well as royalties on any drugs discovered and developed from its sequences and clones. Neither side would disclose specific financial terms.

Genset's earlier agreement with GI called for it to provide secreted proteins for inclusion in GI's DiscoverEase program, but following the signing of this new agreement, it will not be supplying any more secreted proteins for GI's collection. It will nevertheless continue to receive revenues, milestone payments and royalties in respect to the specific proteins included in DiscoverEase.

This agreement with GI is in effect the first manifestation of a new strategy adopted by Genset, which has now decided to market its gene libraries directly. According to its CEO, Pascal Brandys, the company is responding to what he describes as "growing interest from pharmaceutical and biotech companies to access our expanded gene libraries." He said the extensive research capability of GI opened up "significant possibilities for seeing the genes in our libraries developed into products."

Genset claims to possess one of the largest collections of novel human full-length cDNA sequences in the world. Its NetGene proprietary gene library now contains more than 90,000 sequences of 5' sequence tags of human full-length cDNA clones, while a specialized subset of NetGene contains thousands of full-length cDNAs coding for secreted proteins. According to Genset, the majority of the corresponding sequences are novel and more than 2,500 are covered by patent applications.

Genset, meanwhile, is continuing to post heavy losses, although its results for the third quarter indicate that research and development spending has leveled off and that its net loss may now be on the decline. Revenues amounted to Euro7.1 million (US$7.5 million), which was slightly up on the second quarter's Euro6.6 million but lower than in the third quarter of 1998 (Euro8.8 million), when they were boosted by a one-off license fee. R&D funding, including a grant for an early-stage product development program, totaled Euro5 million, 31.5 percent down relative to the corresponding period of last year. Sales of oligonucleotides, on the other hand, were up 45 percent at Euro2.1 million, thanks to strong worldwide demand, especially in Southeast Asia.

As at Sept. 30, the company had cash and cash equivalents of Euro32.1 million.