By Randall Osborne

Genelabs Technologies Inc. has not yet rung the $20 million bell in its deal with DuPont Pharmaceuticals Co. promising up to that amount per gene target, but the companies renewed their agreement for another year.

"We're expecting to have a lead compound for at least one gene target early this year," said Debra Catz Bannister, spokeswoman for Redwood City, Calif.-based Genelabs.

The original, two-year agreement to develop small-molecule, gene-regulating drugs, signed in 1996, included an undisclosed up-front payment, with quarterly funding of research, but no milestone payments have been made, Bannister said. Genelabs made the deal, which could exceed $200 million in value, with DuPont Merck Pharmaceutical Co., a joint venture between DuPont and Whitehouse Station, N.J.-based Merck & Co. The venture since has been bought out by DuPont. (See BioWorld Today, Dec. 19, 1996, p. 1.)

Originally, the collaborators expected to use mostly molecules from DuPont's library, but found it "more beneficial to use combinatorial chemistry, with molecules designed with a specific binding characteristic you need for binding to DNA," she said.

"What's important now is chemistry," Bannister said. Genelabs has been using an outside source for the chemistry, but is building its own department, she said. The company has identified drug binding sites in the promoters of genes selected for the collaboration.

"We went from a very early-stage technology to having molecules in-house that have been synthesized for screening against specific disease gene targets," she added, but declined to disclose the diseases.

The structure of the deal is such that milestone payments could be collectible by Genelabs even if DuPont opts not to take the two remaining, one-year renewals built into the agreement, Bannister added.

"Let's say, at the end of this year, we had a couple of drugs that hit for a couple of gene targets, and [DuPont] decided not to continue at the end of the year," she said. "They could take a drug through development and still have to pay us milestones."

Genelabs' stock (NASDAQ:GNLB) closed Wednesday at $2.437, up $0.062. *