By Debbie Strickland

NEW YORK -- Nine months after launching a $60 million program with Eli Lilly and Co., oral delivery specialist Emisphere Technologies Inc. has secured its third big pharmaceutical collaboration, this time a $35-million-plus-royalties deal with Novartis Pharma AG.

The companies will seek to develop an oral formulation of two undisclosed large-molecule Novartis compounds already on the market, Emisphere executives told investors at the 14th Annual BancAmerica Medical Conference in New York.

Emisphere, of Hawthorne, N.Y., can release no additional information about the drugs or the disease indications, said Lilian Stern, vice president for corporate planning and investor relations.

In exchange for exclusive worldwide rights to oral products resulting from the collaboration, Novartis, of Basel, Switzerland, will provide up-front fees, equity investments, research funding and milestone payments totaling $35 million. Emisphere also will receive royalties on sales of commercialized oral products.

"It's similar in structure [to the Lilly agreement], and represents the model deal we're going after," said Stern. "It does involve an up-front payment, which the Lilly deal did not, but the research funding is comparable."

The milestone payments combine cash and equity investments, with equity purchases to be made in four tranches at a maximum aggregate price of $16 million. The up-front fee and specifics about milestones and research support were undisclosed.

Stern said the research funding covers about a third of Emisphere's burn rate.

In the fiscal year ending July 31, the company reported a net loss of $7.3 million, and ended the year with $33.7 million in cash.

Emisphere's ambition is to develop oral delivery mechanisms for large-molecule drugs, with oral heparin -- expected to enter Phase II/III trials next year -- the most advanced project. That product is the focus of a 50-50 joint venture established in September 1996 with Elan Corp., of Dublin, Ireland.

In animals, Emisphere has used its oral carriers to deliver insulin, human growth hormone, calcitonin, human parathyroid hormone, cromolyn and deferoximine. The company estimates worldwide sales of injectable formulations of these compounds, along with heparin, at more than $5 billion.

In February, the company inked a $60 million deal with Lilly, of Indianapolis, to develop oral forms of two as-yet-undisclosed endocrine proteins, one of which is aimed at growth disorders.

Lilly also has options to license additional rights for other proteins. The companies have not disclosed details of the protein delivery systems under development, except to cite "growth disorders" as one focus of the joint development effort. (See BioWorld Today, Feb. 28, 1997, p. 1.)

In July, Emisphere grossed approximately $20 million in the first stage of a shelf offering, with proceeds directed toward new facilities and research and development. (See BioWorld Today, July 23, 1997, p. 2.)

The company's shares (NASDAQ:EMIS) closed Thursday at $21.50, unchanged. *

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