By Debbie Strickland

Seeking a powerful anti-rejection drug to complement its transplant program, Novartis Pharma A.G. has agreed to pay up to $25 million — including $5 million up front — to option and possibly license T Cell Sciences Inc.'s lead compound, TP10.

The deal boosted T Cell Sciences' shares (NASDAQ: TCEL) Wednesday to $2.938, a 47 percent gain from Tuesday's close of $2. As of June 30, T Cell Sciences had $10.7 million in cash and equivalents, following a net loss of $4.3 million in the first half of the year.

Novartis' $5 million up-front fee covers the two-year option and the cost of supplies of TP10 for clinical trials. Should Novartis, of Basel, Switzerland, exercise its option for worldwide marketing rights, excluding Japan, the big pharma company would pay T Cell Sciences an additional $20 million, including equity, licensing fees and milestone components. The Needham, Mass.-based biotechnology firm also could receive additional research funding and royalties on product sales.

The deal covers only xenotransplantion and allotransplantation. T Cell Sciences retains rights to all other indications, with the exception of Japanese rights to myocardial infarction and adult respiratory distress syndrome, which are covered under an agreement with Yamanouchi Pharmaceutical Co., of Tokyo, and SmithKline Beecham P.L.C., of London.

TP10, or soluble Complement Receptor 1 (sCR1), inhibits complement activation. Complement is a family of immune system proteins that circulate in the blood and help identify and eliminate damaged tissue, contributing to the body's acute inflammatory response against disease, infection and injury.

Excessive complement activation has been implicated in acute respiratory distress syndrome, reperfusion injury following ischemic events, organ transplant rejection, multiple sclerosis, Alzheimer's disease, rheumatoid arthritis and lupus.

The T Cell Sciences product will fit into an array of Novartis transplantation technologies, including a subsidiary's efforts to develop transgenic pigs to provide donor organs resistant to complement attack.

"They want to put together a technology bundle," said Una Ryan, president and CEO of T Cell Sciences. "The option will allow them to evaluate the synergy between their various types of intellectual property.

"Their approach is not just a simple 'mix drugs A, B and C,'" she added. "They've put together a very intelligent approach and we are an integral part of that."

Concurrent with the Novartis deal, T Cell Sciences released preliminary data from an almost-completed Phase I/II trial in patients undergoing lung transplantation.

Preliminary results from the lung transplant trial showed that at 24 hours after surgery, significantly fewer of the patients receiving TP10 required ventilation compared to those receiving placebo. Patients receiving TP10 tended to spend less time intubated and on ventilator. The drug also shaved eight days from the average hospital intensive care unit stay.

Additionally, those who received TP10 and also underwent cardiopulmonary bypass as part of the transplantation procedure showed significantly decreased intubation time and time on ventilation .

Ryan is slated to present results today at International Business Communications' 3rd Annual Conference "Controlling the Complement System," in Washington.

TP10 Also To Be Tested In Cardiac Surgery

Novartis will take over the transplantation clinical trial program during the option period and beyond, if the licensing is finalized.

The next trial of TP10, however, likely will be conducted by T Cell Sciences in a cardiac setting. The drug cleared a Phase I trial in patients with first-time myocardial infarction, and the company plans to seek the FDA's approval to begin a Phase II trial in cardiac surgery patients in 1998.

The company is testing TP10 at the Phase IIa level for Acute Respiratory Disease Syndrome and has developed a second-generation complement inhibitor that could potentially treat stroke. T Cell Sciences likely will seek collaboration agreements in these and other potential individual indications, but probably will avoid a sweeping agreement covering all the drugs' remaining possibilities.

"A complement inhibitor is so fundamental," said Ryan. "We need to do as we have with first license: target TP10 very specifically to companies who will be able to commercialize it for specific indications."

Drug delivery mechanisms may be key to future collaborations. For example, a complement inhibitor could be paired with an inhaler for pulmonary disease, with a smart stent for cardiac indications, or with a skin patch for dermatological diseases.

The company has an agreement with Astra A.B., of Sodertalje, Sweden, for development of two drugs for multiple sclerosis. The products, TM-27 and TP-12, were derived from T Cell Sciences' T Cell Antigen Receptor Program.

Other partnerships are with ArQule Inc., of Medford, Mass., which provides access to ArQule's proprietary, non-peptidic small molecule arrays, and with Oncogene Science Inc., of Uniondale, N.Y., to screen that company's natural products libraries. *

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