By Mary Welch

Ribozyme Pharmaceuticals Inc. and Eli Lilly and Co. signed a deal worth up to $38 million to develop and market Heptazyme for the treatment of hepatitis C.

Under the agreement, Boulder, Colo.-based Ribozyme will receive $9.2 million this year, including initial fees, funding for research and clinical trial materials, and an undisclosed equity investment. Ribozyme could receive up to $38 million in the deal, most of the rest coming from milestone payments. The company also would receive royalties on sales.

In return, Lilly, of Indianapolis, gets worldwide commercialization rights and will handle the drug¿s development, clinical testing, governmental approvals and marketing.

¿We are meeting with Lilly and expect they will take over the development very soon,¿ said Ralph Christoffersen, CEO and president of Ribozyme. ¿Both of us will not hold back on development because there is an extraordinary medical need and the market is also very large. We expect to file an IND [investigational new drug] application before the end of the year.¿

Heptazyme contains many novel features believed to be important for the treatment of the hepatitis C virus (HCV). Heptazyme is a ribozyme, a catalytic RNA molecule that has the unique potential to bind and cleave HCV RNA specifically and selectively, thus suggesting that viral replication can be inhibited without affecting other normal physiological processes. In addition, Heptazyme cleaves the HCV RNA in the Ires region, a location whose sequence is the same in all known forms of the virus.

Drug Candidate Applies To All Subtypes

¿Hepatitis C is like HIV in that it mutates rapidly and develops resistances. So far there are six genotypes and 90 subtypes,¿ Christoffersen said. ¿Heptazyme prevents replication, no matter how the virus mutates. It is applicable to all subtypes and highly specific.¿

Hepatitis C affects some 4.5 million persons in the U.S. and 175 million worldwide, a large percentage of whom don¿t know they have the disease.

¿There was no blood test until 1990 and people getting blood transfusions had no idea if they got hepatitis C as a result,¿ Christoffersen said. ¿The problem is that the disease progresses slowly ¿ 10 to 20 years ¿ and it¿s a silent disease. There are few, if any symptoms. You don¿t know you have it because you don¿t feel bad.¿

But once the disease progresses, it can lead to cirrhosis, hepatocellular carcinoma, liver failure and death.

¿Unfortunately, the treatments currently available work on less than 50 percent of the population and have quite significant side effects,¿ Christoffersen said. ¿So a lot of people with hepatitis C, who are feeling quite good, are given the option of getting treatment that will make them feel quite bad.¿

Heptazyme is similar in its make-up to Angiozyme, Ribozyme¿s anti-angiogenesis compound currently in Phase I trials in collaboration with Chiron Corp., of Emeryville, Calif.

¿In both the animal and human trials, we have not seen any sign of drug-related side effects with Angiozyme,¿ Christoffersen said. ¿So, based on that, we believe that Heptazyme will also be a very benign drug. Also, it is given by a subcutaneous injection, so it can easily be given in the clinic.¿

Preclinical data presented last November showed Heptazyme effectively decreased the hepatitis C viral RNA in cell culture assays. In these studies, Heptazyme demonstrated significant inhibition of the HCV viral transplation process in cells at very low doses, and in a manner that implied applicability across multiple forms of the virus. The findings were presented at the American Association for the Study of Liver Diseases conference in Chicago.

Ribozyme¿s stock (NASDAQ:RZYM) closed Tuesday at $5.062, down 43.75 cents.