By Charles Craig

Transkaryotic Therapies Inc., riding a nearly 120 percent increase in stock price since its debut in the capital markets last October, raised more than $55 million in its first follow-on offering despite facing a potentially protracted patent battle over its lead drug development technology with Amgen Inc.

The Cambridge, Mass., company, which believes it has a method for tapping into the multibillion-dollar market for protein drugs without violating existing patent protections on those products, sold 1.7 million shares to institutional investors at $32.50 per share. All the buyers are existing stockholders.

When Transkaryotic registered for the follow-on offering July 24, 1997, it anticipated selling 1 million shares, but demand among the group of prospective investors pushed the offering to 1.7 million shares.

At $32.50 per share, the equity financing represents a $17.50 increase over the $15 initial public offering price 10 months ago — a 116 percent surge. Pacific Growth Equities Inc., of San Francisco, managed the placement. Transkaryotic has 18.4 million shares outstanding.

The company's stock (NASDAQ:TKTX) closed Thursday up $1.75 to $35. As of March 31, 1997, Transkaryotic had $83 million in cash and reported a net loss of $3.8 million for the first quarter of this year. In 1996, it recorded a net loss of $11.97 million.

Transkaryotic has said its lead technology, called gene activation, avoids intellectual property restraints on making established protein drugs — such as Amgen's red blood cell booster, Epogen (erythropoietin) — by activating genes for the protein in human cells that do not normally produce it. Amgen and other companies that manufacture protein drugs introduce cloned human genes for the protein into non-human cells to generate the products.

Transkaryotic's lead product is erythropoietin (EPO), which is under development with partner Hoechst Marion Roussel, of Frankfurt, Germany. Hoechst filed an investigational new drug (IND) application in May 1997 to begin clinical trials.

The German pharmaceutical firm also is working with Transkaryotic on development of another undisclosed protein drug. The two-product collaboration could be worth up to $125 million to Transkaryotic in license fees, equity investments, milestone payments and research funds.

In July 1997, a federal court judge denied a motion by Transkaryotic and Hoechst to dismiss a patent infringement lawsuit brought in April 1997 by Amgen Inc., of Thousand Oaks, Calif., which earns more than $1 billion a year from Epogen for treatment of anemia. The judge said the request should be refiled as a motion for summary judgment, which will be heard at a later date.

Based on the closing price of $35 Thursday, Transkaryotic's stock has nearly tripled since the April 1997 low, suggesting investors are confident the company's technology, which was issued a patent in June 1997, will survive the challenge from Amgen.

If its technology succeeds, Transkaryotic has said, its products will compete for a share of what it describes as an $11 billion therapeutic protein market.

The company also has three potential drugs in development in its other major program — gene therapy — and expects to file two IND applications with the FDA by the end of the year to begin clinical trials.

Transkaryotic's gene therapy products employ its gene activation technology to engineer patients' cells, ex vivo, to produce a desired protein. The altered cells then are returned to the patient to supply the needed protein in vivo for extended periods. *