PARIS -- Paris-based biotech companies ExonHit Therapeutics SA and Cerep SA have concluded a two-year research collaboration agreement for the development of diagnostic tools for the early prediction of toxicity in new drugs and the identification of two genes associated with neurodegenerative diseases. According to ExonHit's chairman, Bruno Tocqué, it is the first time that two French biotech companies have entered into this kind of alliance.

Cerep is to pay ExonHit a total of FFr13 million (US$2.3 million) in research and development funding during the period of the agreement, as well as acquire FFr3 million of ExonHit shares on the attainment of certain milestones. According to Tocqué, that would give Cerep a stake of around 5 percent in his company.

Cerep, which provides pharmacological evaluation services to some of the world's biggest pharmaceutical companies using highly sophisticated drug discovery technology, is interested in ExonHit's qualitative gene profiling technology, DATAS ("differential analysis of transcripts alternatively spliced"). This technology will be used, first, for the joint development by the two companies of toxicity-prediction assays, for which Cerep will have a nonexclusive license and could receive royalties on sales of these assays by ExonHit Therapeutics. Second, ExonHit will use DATAS to identify two genes or coding sequences involved in certain neurodegenerative diseases, to which Cerep will have exclusive rights.

The agreement also includes a third element, providing for the two partners to cooperate in a drug discovery program in which costs and revenues will be shared between them. This calls for Cerep to use its drug discovery platform for the purpose of identifying active chemical compounds among targets selected by ExonHit.

Ahead For Cerep: Internal Drug Discovery

From ExonHit's standpoint, said Tocqué, the flow of research and development funding arising from this agreement will bring two key benefits. "The cash will enable us to consolidate our existing technology more rapidly, and it will enable us to develop even more attractive technologies for the pharmaceutical industry," he said.

For Cerep, the deal with ExonHit represents a significant step toward the implementation of the next stage in its corporate strategy, namely the discovery of new drugs on its own account, said the company's chairman, Thierry Jean. He explained that Cerep intends to focus on the early stages of drug development, using ExonHit technology to identify therapeutic genes and develop new drugs. In his view, the combination of the two companies' know-how will help reduce the risk of new drugs failing at the clinical stage.

Cerep completed an initial public offering on France's Nouveau Marché in February, shortly after concluding a four-year collaboration agreement worth FFr190 million with the French pharmaceutical company Sanofi, which also acquired a 5.3 percent stake in Cerep at the time. Cerep will identify and develop active compounds in four therapeutic target areas selected by Sanofi, which will have exclusive licenses to drugs resulting from the research.

ExonHit is still controlled by the three former research chiefs from Rhone-Poulenc Rorer Inc. (RPR), of Collegeville, Pa., who founded it in November 1997 with initial funding from three venture capital funds. In September, it concluded a research collaboration agreement with RPR, which is financing a 33-month program for the discovery of two genes or coding sequences validated for their role in the development of epidermoid carcinomas. The agreement also gives RPR the option of acquiring a 5 percent equity stake in ExonHit. *