By Mary Welch

Cell Genesys Inc. reacquired the product rights to its AIDS gene therapy program from Hoechst Marion Roussel Inc. (HMR), its partner in a collaboration that was valued at up to $160 million.

HMR, of Frankfurt, Germany, will pay Cell Genesys $8 million in connection with the termination.

Prompting HMR's action is the recently released Phase II data from a randomized controlled Phase II trial of a T-cell gene therapy for AIDS.

"I believe that what we could say is that the results did not meet Hoechst's standards for continuing on to Phase III trials," said Stephen Sherwin, chairman and chief executive officer of Foster City, Calif.-based Cell Genesys. "Generally speaking, one company could look at data and say it should proceed and another company could look at the data and have a different opinion depending on how it fits into their plans and their pipeline. I must say that HMR does not make an HIV drug."

"I don't view this as a setback at all," said Leslie Marino, an analyst with BancBoston Robertson Stephens Inc. in New York. "I'd say it's a slight negative or neutral. They lost a partner but got $8 million."

Marino said the decision by HMR to relinquish its rights has "less to do with the Phase II results, which were interesting, than with HMR's merger with Rhone-Poulenc Rorer. I think those two companies are getting together and deciding on what to keep in their pipeline after the merger. My assumption is that they'll want to keep the later-stage drugs. While the AIDS gene therapy program produced interesting results, it's not in Phase III."

Last year, Rhone Poulenc SA, of Paris, and Hoechst AG, of Frankfurt, agreed to merge to form Aventis Pharma AG. HMR is a subsidiary of Hoechst. (See BioWorld Today, Dec. 2, 1998, p. 1.)

The collaboration involved using gene therapy to kill any HIV infected cells after a patient undergoes combination therapy.

"It's an immunotherapy to go after the infected cells," Sherwin said. "It's pretty new stuff and we got a good reaction to the drugs."

Patients in the Phase II trial did not have a detectable amount of virus in their blood. One trial involved measuring if there was a relapse after a single dosage and follow-up six months later. Twenty patients received infusions of their own genetically modified T cells with an HIV-specific receptor and 20 received infusions of their own unmodified T cells.

In that trial, five patients of the 20 in the gene-modified T-cell group had an HIV relapse compared to 10 of the 20 in the unmodified group, which fell just shy of reaching statistical significance.

"The study was small - only 20 patients per arm and only one administration," Sherwin said.

The trial did show that patients receiving the gene-modified T cells had a mean 0.4 log decrease from baseline in the amount of HIV cultured from circulating blood cells at six months (p=.02), and a mean 0.5 log decrease from baseline in HIV DNA detected in rectal tissue biopsies at six months (p=.007).

"We find these results encouraging for a novel treatment strategy with relatively new endpoint assays. We're really encouraged," Sherwin said.

In fact, the company intends to continue the program after finding a new collaborator, which could be a corporate partner or a medical one, such as the National Institutes of Health, he said.

There will be no layoffs as a result of its partner ending the relationship, Sherwin said. "The $8 million we expect to receive shortly will increase our anticipated revenues. At the second quarter we had $13 million in revenues and that figure doesn't reflect any payment from HMR from this program. Our burn rate is under $2.5 million for the first six months of the year," he said, adding that the company had more than $50 million in cash.

The company also has two other assets besides revenues for its own collaborations. One is its gene-activation licensing program; the other is the 22 percent ownership of Abgenix Inc., of Fremont, Calif., a Cell Genesys spin-off. "At yesterday's closing price, that 22 percent was worth $140 million," Sherwin said.

The 1995 deal called for HMR to pay up to $160 million, with $50 million in committed payments over two years; $20 million was in the form of an equity investment at a 50 percent premium, and $30 million in research payments. Over the course of the next five years, another $100 million in research and milestone payments, with the majority in research funding, could be made. Warrants issued could result in another equity investment of nearly $10 million. Sherwin would not disclose how much Cell Genesys received from the collaboration.

Although this program is terminated, the two companies still are working together in gene-activation technologies for specific therapeutic programs. In 1997, the two companies signed a license agreement, with HMR provided access to Cell Genesys' gene-activation intellectual property for erythropoietin and a second undisclosed protein. To date, Cell Genesys has received $13 million from this partnership.

Cell Genesys' stock (NASDAQ:CEGE) closed Wednesday at $7.687, down $1.187.