By Mary Welch

Genetronics Biomedical Ltd.'s Electoporation Therapy for cancer netted a licensing and supply deal with Johnson & Johnson (J&J) worth at least $15 million, and possibly in excess of $130 million.

Brooks Riggins, analyst with Canaccord Capital Corp., in Vancouver, British Columbia, said the $15 million is up-front money, and the value of the deal is much higher. He said even the company's estimate of an eventual $131 million is "very much conservative. It looks bigger to us."

Under the terms of the deal, Genetronics, headquartered in San Diego with a holding company in Vancouver, will sell $6 million in stock to the Johnson & Johnson Development Corp., of New Brunswick, N.J. The remainder of the money will come in the form of an undisclosed up-front license fee and milestone payments. Genetronics also gets a percentage of future net sales, as license fees and to cover manufacturing costs.

Riggins' report said the up-front cash will total about $15 million. J&J will spend $25 million on clinical and regulatory expenses, he estimated. The eventual royalty will be about 15 percent, he said.

As part of the agreement, Summerville, N.J.-based Ethicon, a subsidiary of J&J, gets worldwide exclusive licensing and marketing rights to Genetronics' Electroporation Therapy for cancer. Ethicon will help develop and clinically test the drug delivery system and will conduct regulatory activities throughout the world, except Canada. Genetronics has retained the right to market the therapy in Canada.

Lois Crandell, president and CEO of Genetronics, said the $131 million is "based on our own projections. They are not [J&J] numbers or forecasts."

Riggins said J&J "doesn't want the numbers to be released because it may serve as a benchmark for other deals, but we believe it was quite an aggressive deal because the product is in late-stage development. It is not preclinical."

Genetronics' therapy "could be ready for market in Europe by mid-next year, and first quarter 2000 in the U.S. and Canada. And, from what we understand, the quality of the data is quite high. We also believe that [J&J] will aggressively market the product, and they have the means to do it."

Since 1991, Genetronics has been developing its Electroporation Therapy to treat cancer patients with solid tumors. Bleomycin, a generic anticancer drug, is injected, and the company's MedPulser device delivers a series of six pulses, each lasting less than a millisecond, to the site. Voltage from the MedPulser causes pores to appear in cell membranes, making them temporarily much more permeable and allowing the drug to invade the interior of the target cells.

With the drug breaking through into the cell's interior, only about 2 percent of the maximum allowed dosage of bleomycin is needed.

The company is conducting Phase IIb trials at 17 institutions in the U.S. and Canada in patients with head and neck cancer, and pivotal trials in France in patients with abdominal cancers, Kaposi's sarcoma, melanoma and head and neck cancer. The endpoints are tumor shrinkage at three months and quality of life.

"Only dividing cells are killed, so it's selective," Crandell said. "We've had good success in the trials. Some patients reported brief sensations of tingling and muscle twitches, but compared to chemotherapy, it must be considered pretty benign. "

The company anticipates filing a new drug application with the FDA in 2000, and receiving marketing approval in Europe next year.

"We expect [the product] will have a selling price of about $3,000 in the U.S., less in Europe and Asia," Riggins said. "When you consider the cost factor and J&J's marketing ability, we believe Genetronics will be a leader in alternative treatments for solid tumors."

Genetronics' believes its Electroporation Therapy has applications in indications other than cancer, but decided to focus on oncology first. The other areas of potential use are: dermatology, vascular therapy, transdermal drug delivery and gene therapy.

Genetronics' stock (TSE:GEB) closed Thursday at C$4 (US$2.61), down C$0.40. *

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