By Debbie Strickland

Six weeks after going public, Progenitor Inc. has partnered a service that could hit the market within months: a genetic test for hereditary hemochromatosis, an inherited disease linked to cirrhosis, liver cancer and other debilitating conditions.

The Menlo Park, Calif.-based functional genomics company licensed exclusive rights for centralized testing to SmithKline Beecham Clinical Laboratories Inc. (SBCL), of Collegeville, Pa. The agreement covers the U.S., along with certain undisclosed countries in Central and South America, Europe, and the Pacific Rim. SBCL is a subsidiary of London-based SmithKline Beecham P.L.C.

The news couldn't have come at a more appropriate time, since Sept. 22-28 is Iron Overload Disease Awareness Week, according to the Iron Overload Diseases Association, a patient advocacy organization based in North Palm Beach, Fla.

Progenitor's stock (NASDAQ:PGEN) closed Monday at $4.625, up $0.063.

"This was the first thing we promised our investors we would do [after the IPO] and we did it," said Mark Bagnall, Progenitor's vice president for finance and chief financial officer. "It's nice to have checked off a significant milestone so soon."

As for potential revenues to Progenitor, "it's difficult to say" exactly what they might be, Bagnall said. "It should be several million dollars over the six years of the deal . . . We hope it will be $4 million or $5 million a year five years from now."

Sales of the test could total $5 million in 1998, according to Matthew Murray, an analyst with Lehman Brothers Inc., in New York.

Revenue growth will depend on increasing awareness of the disease, Bagnall said.

"It's a very unknown disease, even though it's very widespread," Bagnall said. "Only about 5 percent know they have it."

According to Progenitor, one of every 10 persons of European descent is thought to be a carrier of hereditary hemochromatosis. One of every 200 is believed to have two copies of the mutant gene, making them likely to develop the disease.

Disorder Can Be Corrected

Detected early, hemochromatosis is easily treatable with regular phlebotomy to reduce iron stores. If untreated, the iron accumulation can cause conditions such as cirrhosis or cancer of the liver, diabetes mellitus, arthritis and cardiomyopathy.

Symptoms of hereditary hemochromatosis are often similar to those of other conditions; severe disease effects do not appear until after decades of progressive iron accumulation.

In 1996, researchers at Mercator Genetics Inc. discovered the gene responsible. Progenitor acquired Mercator in August, at the same time Progenitor completed its IPO.

SBCL's Genetic Testing Center, in Van Nuys, Calif., will perform the approximately $175 blood test, designed to confirm the cause of iron overload in symptomatic patients. The test can also assess the disease risk for patients' family members and for individuals with a family history of iron overload disease.

Currently, a liver biopsy is the only way to confirm diagnosis of hereditary hemochromatosis when a blood screening detects an abnormally high iron saturation level.

"The [new] test avoids something that's invasive and pretty ugly," said Bagnall.

SBCL's rights do not include diagnostic kits under development for on-site tests that physicians could use at their offices, though the companies are discussing a wider agreement. The on-site diagnostic kits must receive FDA approval and will not be available for several years.

Progenitor also retains rights to therapeutic applications of the hemochromatosis gene.

Not An Easy Time For An IPO

Progenitor — a spin-off of Interneuron Pharmaceuticals Inc., of Lexington, Mass. — first registered for an IPO in June 1996. After 14 months and numerous postponements, Progenitor priced 2.75 million units at $7 each for gross proceeds of $19.25 million.

"It was not the easiest time," said Bagnall. "The story that we told was not an easy story. There are a lot of different elements to the company's technology base."

Progenitor's research programs run the gamut from developmental biology to informatics. Major partners are:

* Chiron Corp., of Emeryville, Calif., for gene therapies targeting cancer, cardiovascular disorders and infectious disease;

* ZymoGenetics Inc., a Seattle-based subsidiary of Novo Nordisk A/S, of Bagsvaerd, Denmark, for the development of two blood cell growth factors involved in restoring bone marrow depleted by cancer chemotherapy and radiation treatment;

* Amgen Inc., of Thousand Oaks, Calif., for rights to the leptin receptor gene, which has potential applications in the treatment of obesity and diabetes.

Combined, these three deals are worth up to approximately $140 million if all milestones are met.

Following the IPO and acquisition of Mercator, the company relocated from Columbus, Ohio, to Mercator's hometown of Menlo Park. Progenitor needed to move to take advantage of Mercator's relationships with Stanford University and California-based companies such as Affymetrix Inc., of Santa Clara, Calif. Progenitor and Affymetrix are evaluating the possibility of combining their technologies to identify DNA variations in expressed genes.

"It just made sense to do our work out here," said Bagnall. *