By Jim Shrine

Alexion Pharmaceuticals Inc. signed a letter of intent to regain complete ownership of its xenotransplantation program and purchase the transgenic-pig manufacturing facility built by former partner U.S. Surgical Corp.

The move came after Tyco International Ltd.'s acquisition of U.S. Surgical, completed in October. In addition, three existing Alexion shareholders took away the overhang of Alexion stock by purchasing Tyco's 7 percent stake.

"We're very grateful to U.S. Surgical; we had an excellent relationship with them," said Leonard Bell, president and CEO of New Haven, Conn.-based Alexion. "And we're especially grateful that Tyco agreed to sell the manufacturing facility."

Bell called it a win-win situation for Alexion and Tyco, and for Alexion shareholders. The positive for Tyco, he said, is that the deal relieves the company of capital expenses in areas outside its focus and relieved it of the stock easily.

Alexion reacquired all rights without reimbursing the investments U.S. Surgical made in the program since the companies began collaborating, in August 1995. U.S. Surgical, of Norwalk, Conn., had purchased about $8.7 million in Alexion stock, and provided at least $7 million in research funding.

Terms of the manufacturing-facility purchase were not disclosed, but Bell said the transaction involved a note under favorable terms.

"We assisted Tyco in placing the stock and at the same time they gave us back our technology rights, free and clear," Bell said. "And we agreed to purchase the farm from them. We're thrilled we were able to come to this conclusion. It's the best outcome we could imagine. The program has progressed substantially in three years."

Getting the manufacturing facility gives Alexion control over the speed of development and also gives it latitude in collaborative opportunities, Bell said.

"We have no real interest in forming another large partnership in this area," he said. "We've identified multiple product opportunities within the xenotransplantation program and have received solicitations from a number of companies. We'll probably select partnerships selectively over time.

"We have a number of cells, tissues and organs under preclinical development," Bell added. "Firms have expressed interest in particular areas. By having all manufacturing under our control, we're able to do that."

Researchers at Harvard Medical School and Alexion presented data in November, showing restoration of brain function following the first xenotransplantation of transgenic pig nerve cells in an animal model of Parkinson's disease. Also in November, Alexion and Yale University School of Medicine researchers reported data showing transgenic pig cells form a sheath around damaged neurons in animals whose spinal cords were severed. The spinal cords that received the pig cell transplants showed restoration of normal nerve-signal conduction.

In October, Alexion received a $2 million grant from the federal Advanced Technology Program (ATP) for work in the spinal cord area. That was the third ATP grant Alexion has received for the xenotransplantation program, and the grants total $6 million.

To counter the problem of hyperacute rejection of xenografts, Alexion is creating pigs altered to reduce or eliminate the expression of non-human sugars that are targets of complement attack, and further engineering them to express human complement inhibitor proteins that shield against the immune attack.

Alexion's stock (NASDAQ:ALXN) gained $0.625 per share after the news was released late Wednesday afternoon and closed Thursday at $13.25, up $0.125. *

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