By Debbie Strickland

Two weeks after the release of positive Phase III data, Immunex Corp. inked a $100 million deal for North American promotion of Enbrel, a rheumatoid arthritis drug whose active ingredient is the tumor necrosis factor receptor.

The news of Immunex's most potentially lucrative product agreement in the company's 15-year history drove its shares (NASDAQ:IMNX) up 11 percent Friday to $66.125, a $6.375 surge. In the last year, the company's share price has increased more than fivefold, rising to its current level from about $13 in September 1996.

"Outstanding, amazing, spectacular," said analyst Edmund Debler, describing Immunex's deal with American Home Products Corp. (AHP), which adds promotion in North America to its marketing agreement for Enbrel covering the rest of the world.

Under the new agreement, Wyeth-Ayerst Laboratories, a division of Madison, N.J.-based AHP, will promote Enbrel for all indications other than oncology, for which Immunex holds exclusive promotional rights and has an existing sales force. Immunex also retains the option at any time to copromote Enbrel in Wyeth-Ayerst's indications, with the big pharma company sharing Immunex's sales force costs in these areas.

"The pieces naturally fit together," said Ed Fritzsky, chairman and CEO of Immunex. "Wyeth enjoys the highest market share of arthritis products today, and with its large sales force, delivers two times the number of sales presentations as its nearest competitor."

AHP owns 54 percent of Seattle-based Immunex and made an offer to buy the company in 1995 for $14.50 a share. That offer was rejected as inadequate.

"What this [new deal] does to some degree is buy AHP some more time," said Debler, predicting "the endgame will be a buyout."

There are, however, no current takeover discussions, according to Fritzky.

The companies' new agreement calls for Immunex to receive up to $100 million in milestone payments from AHP: $15 million upfront, $20 million upon filing a new drug application with the FDA and $30 million upon approval from the agency, with the remainder being triggered by label expansion for patients with early stage rheumatoid arthritis and the achievement of product sales targets.

"The first surprise is how lucrative it is for Immunex from the standpoint of milestones, that they are as large as they are and guaranteed," said Debler. "The first $35 million is a no-brainer, and they're pretty confident about approval, so that takes it to $65 million."

Enbrel May Reach Market In Two Years

Immunex plans to submit a new drug application for Enbrel in 1998. Approval and initial marketing could come in 1999, with the first full year of sales expected in 2000, said Debler. That's the year the analyst expects the company to become operationally profitable.

Debler also likes the fact that "Wyeth-Ayerst will pay for the majority of costs, and Immunex will always retain a larger share of profits."

Immunex will record all North American sales and pay to Wyeth-Ayerst a percentage of the annual gross profits on a scale that increases as sales grow, with Immunex retaining more than half of gross profits.

On the cost side, Wyeth Ayerst will cover the majority of commercial expenses pre-launch and for two years post-launch, after which the two companies will share expenses on a 50-50 basis.

Wyeth-Ayerst, of King of Prussia, Pa., also pledged to reimburse Immunex for a majority of the development costs incurred to win approval of new indications in North America, excluding oncology and broader applications in rheumatoid arthritis. (Wyeth-Ayerst currently shares Enbrel development costs in North America and Europe with Immunex for rheumatoid arthritis indications, under the provisions of an earlier agreement.)

All told, AHP will absorb the bulk of development expenses for Enbrel, freeing up research and development dollars at Immunex, which as of June 30 had $70.04 million in cash. The company's net loss for the first half of 1997 was $17.40 million.

"We've got a full plate," said Fritzky, referring to Immunex's research programs, including Enbrel, which recently completed a Phase I trial in congestive heart failure.

Enbrel is a tumor necrosis factor receptor that regulates inflammation by blocking the interaction of the proinflammatory cytokine TNF with the cells that respond to its signal. The latest Phase III trial achieved statistically significant positive results in patients with advanced rheumatoid arthritis, and another Phase III is under way in early stage patients to determine whether Enbrel can stall disease progression. *