By Randall Osborne

To push its treatment for inflammatory bowel disease from preclinical trials to market, LeukoSite Inc. has entered an agreement worth up to $50 million with Genentech Inc., and expects to begin Phase I trials of the humanized monoclonal antibody next year.

"The preclinical work has been quite a success, and there's a commitment to have a product at the end," said Gus Lawlor, vice president of corporate development and chief financial officer of Cambridge, Mass.-based LeukoSite. No term of duration was specified in the agreement.

Genentech, of South San Francisco, will make a $4 million equity investment in LeukoSite, pay up to $8 million in milestone payments and provide two credit facilities, or lines of credit.

The first facility will be for $15 million, associated with LeukoSite's development of the product through Phase II trials, and the balance will be paid to LeukoSite if it agrees to fund 25 percent of Phase III development costs in return for a share of profits on U.S. sales. LeukoSite could opt for sales royalties and decline to fund the Phase III trials, leaving them to Genentech.

Genentech bought 336,135 shares of LeukoSite's stock at $11.90 per share to satisfy the equity investment. The price is a 10 percent premium over Wednesday's closing price. Genentech also received warrants to purchase 250,000 shares of LeukoSite common stock at $16.22, which is a 50 percent premium.

LeukoSite's drug candidate, known as LDP-02, represents "a unique and selective approach, related to the biology we've developed in collaboration with Stanford University," of Stanford, Calif.

The humanized monoclonal antibody works by blocking the recruitment to the site of bowel inflammation a subclass of white blood cells that cause ulcerative colitis and Crohn's disease. It binds to the alpha4-beta7 integrin molecule, which is on the surface of the leukocytes and which binds the receptor that directs white blood cells to the bowel.

A Phase I trial of LDP-02 will be conducted first in healthy volunteers and then in patients. "We don't know when precisely, but they'll start in the early part of 1998," he said.

Tim Wilson, an analyst with UBS Securities, of New York, said in a report that Genentech is "an excellent partner for LeukoSite, having long experience with the development, manufacturing and sales of protein drugs in general, and antibodies in particular."

Genentech this week received clearance from the FDA to market Nutropin (somatropin of rDNA origin for injection) for the replacement of endogenous growth hormone in adults with growth hormone deficiency. First marketed in 1993, Nutropin already was approved for treatment of children suffering from growth failure caused by inadequate hormone levels and chronic renal insufficiency.

In January, the FDA approved Nutropin for treatment of a rare female disorder called Turner's syndrome, which congenitally afflicts one in 2,500 girls. Turner's syndrome is characterized by mutations in one of two X chromosomes and causes a number of problems, including short stature. (See BioWorld Today, Jan. 2, 1997, p. 1.)

As of Sept. 30, LeukoSite had $25 million in cash, with a net loss of $6.9 million for the first nine months of 1997. The company's stock (NASDAQ:LKST) closed Thursday at $11.125, up $0.25.

Genentech's shares (NYSE:GNE) closed Thursday at $58.75, up $0.25. *

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