LONDON ¿ Sugen Inc., of South San Francisco, formed an independent subsidiary in Schaffhausen, Switzerland, which will tap European funds to commercialize the company¿s cancer products in Europe.

James Knighton, CFO of Sugen, said the subsidiary is ¿an extremely innovative structure we have put together to create value for our shareholders. It is a wholly owned subsidiary and, at the same time, has considerable independence of Sugen Inc.¿

The company said it had considered a number of ways of building a presence in Europe to proceed with the commercialization of its products, four of which are currently in Phase III trials. It rejected extending the Sugen Inc. infrastructure to Europe as ¿too expensive and risky¿ for a company of its size and stage, and decided not to partner globally with a large pharmaceutical company because of the lower returns and ¿the desire to establish the Sugen name as an innovator,¿ Knighton said.

Sugen Europe AG has retained Dresdner Kleinwort Benson, of London, to advise on its financing strategy, but Knighton would not disclose any details of fund-raising plans until they are complete. He did say the aim was to ¿get more direct access to a broader European investor audience.¿

The subsidiary will in-license rights to Sugen Inc.¿s products, and will be responsible for European clinical development and for setting up partnerships with national pharmaceutical companies for local marketing and distribution.

¿We recognized that we needed to target large national or regional pharmaceutical companies, because the oncology market in Europe is considerably fragmented,¿ Knighton said. ¿The national companies have better access within their countries than global pharmaceutical companies.¿

Although there is some degree of harmonization, the clinical regulatory regime still varies from country to country and is considerably different from the U.S.

¿These types of companies will more equally share the financial benefits and rewards than if we did a simple royalty-based deal,¿ Knighton added.

In accordance with the strategy, Sugen announced its first deal, with Esteve SA, the second-largest pharmaceutical company in Spain. Esteve will be responsible for marketing, promotion and distribution of three products ¿ SU101, SU5416 and SU6668 ¿ in Spain and Portugal. Esteve has made an undisclosed equity investment in Sugen Inc. Similar agreements are being negotiated elsewhere, and the partnerships all will be in place by the end of 1999, the company said.

The board of Sugen Europe AG met for the first time last week under the chairmanship of Sugen Inc. CEO Stephen Evans-Freke. The acting CEO of the subsidiary is Samuel Hamad, most recently president of Bristol-Myers Squibb Europe. The chief medical officer is Paul Scigalla, formerly with Boehringer Mannheim GmbH, and the chief financial officer is Alan Khouri, former president of finance at Bristol-Myers Europe. n