By Randall Osborne
Less than a year after Genzyme Corp. pledged up to $66 million to ongoing product development by its subsidiary, Genzyme Tissue Repair (GTR), the board of the parent company has voted to buy for $25 million the division¿s interest in the NeuroCell joint venture to develop cell therapies for Parkinson¿s and Huntington¿s diseases.
The buyout would reduce GTR¿s burn rate by about $2 million per quarter, and let the division focus its resources on developing orthopedics and burn-care products, and on marketing Carticel, a knee-repair product that uses autologous cultured chondrocytes. If the transfer goes through, the Carticel business would be on track for profitability in four to six quarters, GTR said.
Tim Surgenor, GTR¿s president, called the deal ¿mainly a financial transaction. We¿re not trying to make an organizational change so much as a financial change.¿ Proxy materials will be mailed in the middle of this month, and shareholder approval sought shortly, he added.
¿This program is a key program, as defined in the charter,¿ he said. ¿It can¿t be moved out of a tracking stock division without approval of the shareholders.¿
$20 Million Is Pre-Payment
Under the terms of the transfer, Cambridge, Mass.-based Genzyme Corp. will assume all future funding and obligations and risks of the NeuroCell program, which is partnered with Diacrin Inc., of Charlestown, Mass. Diacrin/Genzyme LLC, a joint venture, is conducting Phase II clinical trials of NeuroCell-PD for Parkinson¿s disease.
The Huntington¿s disease aspect of the NeuroCell program is in Phase I trials.
Five million dollars of the $25 million to GTR is non-refundable, and the rest is a pre-payment related to achievement of milestones. If the joint venture does not begin a Phase III clinical trial of NeuroCell-PD by June 30, 2000, then $20 million must be repaid. If the Phase III trial begins by then, but the product is not approved by June 30, 2004, then $15 million must be repaid. NeuroCell-PD involves transplantation of fetal porcine brain cells.
As part of the transfer agreement, GTR also would receive royalties of 3 percent on sales of any products developed by the joint venture, whether or not the joint venture reaches profitability.Genzyme Corp.¿s stock (NASDAQ:GENZ) closed Thursday at $50.75, up $0.312. GTR¿s shares (NASDAQ:GZTR) ended the day at $2.375, up $0.062.