By Lisa Seachrist

Washington Editor

WASHINGTON — Genetics Institute entered into a strategic alliance with the French genomics company Genset SA that will significantly increase the number of proteins in its substantial library of novel human secreted proteins.

The agreement, which could surpass $20 million for Genset, of Paris, calls for Genset to provide, on an exclusive basis, full-length genes encoding novel human secreted proteins from its SignalTag Library to Genetics Institute, which will express those genes and include the proteins in its DiscoverEase protein development platform — a database and library of 5,000 proteins that Genetics Institute licenses to corporate and academic partners on a non-exclusive basis and also uses in its own drug development programs.

All proteins, regardless of original source, will be made available to Genetics Institute's current corporate partners, which include Genentech Inc., of South San Francisco, Chiron Corp., of Emeryville, Calif., Kirin Brewery Ltd., of Tokyo, and Ontogeny Inc., of Cambridge, Mass, as well as to all future DiscoverEase participants.

"The collaboration offers real value for our customers to access both companies' proteins under existing business agreements," Adelene Perkins, business director for DiscoverEase at Genetics Institute, a subsidiary of American Home Products Corp., of Madison, N.J. "It's really a huge advantage for our customers."

Under terms of the agreement, Genset will receive payments based upon the number of novel SignalTag secreted protein cDNAs (complementary DNA sequences) included in Genetic Institute's DiscoverEase platform as well as the number of those proteins ordered by DiscoverEase participants. The payments could total $20 million if 2,000 are delivered to Genetics Institute and ordered by a certain number of the participants.

"We like the fact that Genetics Institute has an established business platform to distribute proteins as well as clones to customers for evaluation as potential therapeutics," said Audrey Keane, vice president of business development for Genset. "This allows us to reach a large number of commercial partners and receive revenues in the near term with only one transaction."

In addition, the agreement could result in far more revenue for Genset should Genetics Institute or one of its DiscoverEase participants develop a therapeutic using SignalTag proteins. In that event, Genset is entitled to option fees, license fees, milestones payments and royalty payments.

Secreted proteins are molecules that carry signals between cells and are attractive as biopharmaceuticals. These proteins can be identified by a specific stretch of DNA called a signal sequence that tells the cell to secrete the proteins. Secreted proteins currently used as drugs include insulin, growth hormone and interferons.

Genetics Institute, of Cambridge, Mass., expects to identify more than 6,000 secreted proteins using its functional assay, which relies on corrupting the invertase enzyme system in yeast. Invertase is a vital secreted protein for yeast that, like human proteins, requires a signal sequence to be secreted. By removing that sequence and fusing portions of human genes to the invertase gene, Genetics Institute can identify human genes that encode for secreted proteins.

Genset has 3,000 cDNA clones it has identified as containing a signal sequence with its patented 5 Prime Technology. Genset's technology rapidly identifies and isolates cDNAs containing the signal sequences through a specific tagging process.

"This agreement allows DiscoverEase participants access to the combined intellectual property of Genetics Institute and Genset," Perkins said.

Genset's stock (NASDAQ: GENXY) closed Monday at $24.12, up $0.125. *