LONDON ¿ Xenova Group plc, of Slough, has sold its natural products drug discovery arm to the privately owned Canadian company, TerraGen Diversity Inc., of Vancouver. The deal is worth up to #5 million (US$8 million), but only #1 million of this will be paid this year in cash.

The sale of Xenova Discovery will boost Xenova¿s cash resources and leave it free to concentrate on drug development in the area of cancer. Xenova is also looking for a partner for, or to sell, its other technology subsidiary, Metaxen, which specializes in lead optimization and early-stage modeling of the characteristics of drug candidates.

At the same time, Xenova said it will terminate its Advant joint venture with EG&G Wallac of Finland, which began operations in the first quarter of 1998. Advant provides high-throughput screening assay services. Continuity of the full range of services provided by Advant has been agreed upon, and existing orders will be fulfilled under the current Advant operations.

David Oxlade, CEO of Xenova, said, ¿This marks the fulfillment of a key component of Xenova¿s strategy of concentrating resources on the development of our pipeline of novel, commercially valuable and innovative new drugs, primarily for the treatment of cancer.¿

Under the deal TerraGen will acquire Xenova¿s business performing fermentation, compound isolation and characterization, assay development and high-throughput screening, along with its collection of rare microorganisms, NatChem natural product libraries and U.K. facilities.

TerraGen will take over existing lead compound collaborations with Warner-Lambert/Parke-Davis and Bristol-Myers Squibb, but Xenova will retain some rights and royalties if any of the products discovered while it owned Xenova Discovery are commercial ized. In addition, Xenova will have the right to use the NatChem libraries and other key technologies for its own drug discovery program, under agreed terms. It will retain its QTC libraries and some other minor discovery assets. Oxlade commented, ¿[This] achieves our stated objective of realizing value from Xenova Discovery¿s platform technologies, while retaining access to them.¿

Xenova will receive #1 million cash in 1999, comprising #250,000 on completion and #750,000 no later than Nov. 1, 1999. It will also acquire a six percent stake in TerraGen Diversity Inc., equivalent to #1.5 million, and a convertible loan note of #1.5 million, which when converted could give Xenova up to 12 percent of TerraGen¿s equity. Xenova will be entitled to a further cash payment of #one million if TerraGen signs certain collaboration deals within 16 months of completion.

The total net assets of Xenova Discovery were #one million as of Dec. 31, 1998. Losses attributable for the year to Dec. 31, 1998 were #5.6 million. n