By Mary Welch

Genzyme Transgenics Corp. will develop a transgenically produced therapeutic protein for Eli Lilly and Co. and for its efforts, the Framingham, Mass., company could receive up to $22 million in development funding and milestone payments.

"This is a significant step forward for us, where we will be developing a high value novel protein," said Patricia Dimond, director of corporate development for Genzyme Transgenics.

Genzyme entered into a feasibility agreement with Indianapolis-based Lilly in March and produced a transgenic protein in mice. The success of the protein's development spurred the new agreement.

"This is a considerable expansion of the earlier agreement," Dimond said. "I don't even think there were any financial arrangements involved (in the original pact). What we will be working on under this new agreement is to further develop the protein into larger animals."

Neither company would reveal the protein or the disease target.

"Down the road, we will disclose those," said James Kappel, spokesman for Lilly. "But for competitive reasons, we can't now. However, we feel that we have a good opportunity to produce potential products down the road. We think our collaboration with Genzyme and its technology shows a lot of promise. It's a good partnership."

Genzyme Trangenics develops and produces recombinant proteins and monoclonal antibodies in the milk of transgenic animals. Dimond said the type of larger animals that will be used in this project has not been decided.

Under the Lilly deal, Genzyme Transgenics will receive $1 million by the end of 1999, which is when the option period expires. Upon execution of the option, Genzyme Transgenics will receive development funding and milestone payments.

"We expect the option to be signed next year and development and milestone payments to be throughout the length of the agreement, probably about four to five years," Dimond said.

Genzyme Transgenics' stock (NASDAQ:GZTC) closed Monday at $7.625, up $0.125.

Lilly Monday also became the first pharmaceutical company to license Pangea Systems Inc.'s integrated bioinformatics software — which includes GeneWorld software, GeneThesaurus data subscription service and Pulse, an information management environment — for use in Lilly's genomics and target validation efforts.

Terms were not disclosed.

"It's an important deal for us but not one of our largest," said Lilly's Kappel.

Pangea, a privately held company located in Oakland, Calif., provides software for advanced bioinformatics.

The GeneWorld software is an automated, high-throughput analysis application that allows researchers to evaluate high volumes of gene sequence data. GeneThesaurus allows users to scan all public domain databases of gene sequences. Pulse is a management system that integrates all the other components. *

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