By Debbie Strickland

San Diego-based Cytel Corp. and G.D. Searle & Co. have signed a letter of intent to collaborate on vaccine development through a new Cytel spin-off, Epimmune Inc. As a prelude to a broad collaboration centered on cancer therapeutic vaccines, Searle is making an immediate $5 million investment in Cytel Corp.

Based in Skokie, Ill., Searle is a subsidiary of Monsanto Co., of St. Louis.

"The much bigger announcement will come when we complete the definitive licensing and collaboration agreement," said Deborah Schueren, Cytel's chief financial officer. She expects the deal to be completed by the end of the year.

About 25 of Cytel's 95 employees are joining Epimmune, which is starting out with the intellectual property of Cytel's immune stimulation program: a library of epitopes (antigen fragments), the PADRE immunostimulant technology and the Theradigm system for delivering disease-specific antigenic peptides.

"Epimmune and Searle intend to focus on the development of Epimmune's cancer technology, which allows creation of novel cancer-specific immune responses," said Robert Chesnut, executive vice president of research and development at Epimmune. "The goal will be to combine cancer epitopes with complementary proprietary immune-enhancing technology to produce the maximum anticancer therapeutic response."

Work Focuses On Vaccines

Cytel's new subsidiary will work on therapeutic and prophylactic vaccines to combat cancer and infectious diseases. The company will be independently financed and managed, though details of the financial foundation are as yet undisclosed.

Epimmune is the second vaccine company set up by Cytel. The first, Sequel Therapeutics Inc., was set up in 1992 as a joint venture with Scripps Research Institute, of La Jolla, Calif. Scripps sold its interest in Sequel in October 1995, and the vaccine development effort was merged with Cytel.

Epimmune grew out of Cytel's restructuring in the wake of a drug development setback and the loss of two corporate partners: Pharmacia & Upjohn, of Kalamazoo, Mich., and Schwarz Pharma A.G., of Monheim, Germany.

The spin-off will save Cytel $6 million to $7 million a year in expenses. The company lost $7.62 million in the first half of 1995, and as of June 30, had $15 million in cash.

The restructuring also allows for more focused development of Cytel's core carbohydrate programs, said Schueren.

"We decided back in April that Cytel had too many different, diverse programs," she said. "We have a wealth of technology, but it is quite diverse, and we didn't feel like it was being maximized."

As for specific products, Epimmune will inherit an ex vivo vaccine for malignant melanoma slated for a Phase I/II trial this year, to be conducted with Baxter International's Irvine, Calif-based Biotech Group; a Theradigm-based HIV vaccine in an ongoing National Institutes of Health-sponsored clinical study; and Theradigm-HBV, a treatment for chronic hepatitis B that has completed Phase II trials.

Cytel will retain its carbohydrate program, which includes Cylexin, currently in a Phase II trial for the prevention of inflammatory damage caused by reperfusion of blood following surgery to correct congenital heart defects in infants.

Cylexin, formerly partnered with Schwarz for reduction of cardiac reperfusion in angioplasty patients, is a small-molecule carbohydrate that acts as a cell adhesion inhibitor. The drug failed at the Phase II level in the angioplasty indication, but the company and its collaborators at Boston Children's Hospital and Harvard University "are very enthusiastic about its prospects in the infant heart surgery setting," said Schueren.

Another drug candidate, CY-1748, is a monoclonal antibody against P-selectin to prevent reperfusion injury and platelet aggregation. P-selectin is an adhesion molecule on platelets; when it interacts with white blood cells, it can trigger blood clots. CY-1748 was partnered with Pharmacia & Upjohn until January. Cytel is seeking a partner for the development of the drug for deep vein thrombosis and restenosis.

The company also is retaining its revenue-generating Glytec division, formed to commercialize Cytel's patented carbohydrate manufacturing technology.

Glytec currently has a nutritional-product carbohydrate collaboration with Abbott Laboratories, of Abbott Park, Ill. Cytel produces carbohydrate molecules for Nextran Inc., of Princeton, N.J., to use in xenotransplantation. Nextran is a subsidiary of Baxter International, of Deerfield, Ill.

Cytel's shares (NASDAQ:CYTL) closed Friday at $2.25, down $0.125. *

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