By Debbie Strickland

Having steered its breast cancer test to a premarketing application with the FDA while developing a steady revenue stream from sales of its gene-specific DNA probes and related technologies, Oncor Inc. is seeking a "large health care" partner to market its core business: a broad pipeline of gene-based cancer diagnostic tests.

"With the pipeline of molecular medicine-based cancer tests we have under development, now's a good time for the company, we think, to explore a strategic alliance and look for a partner company to build the franchise," said Stephen Turner, chairman and CEO.

The Gaithersburg, Md., company has engaged investment banking firm Lehman Brothers, of New York, to help with the quest, which could lead to sale of the company.

"When you retain a firm like Lehman Brothers to help with strategic alliances, this always includes the possibility of sale," said Turner. "They've done a lot of creative alliances, like Roche and Genentech."

In 1990, Roche Holding Ltd., of Basel, Switzerland, acquired 60 percent of South San Francisco-based Genentech for $2.1 billion. Roche currently owns 67 percent.

Oncor is dealing from "a position of strength," said Lehman Brothers Senior Vice President Angus Macdonald, of the firm's Boston office.

"They've always been able to raise cash when they need it. And like most biotechnology companies, they do need cash," he said. "But unlike other biotechnology companies, they have products."

The company's products include a breast cancer test approved in much of Europe and tests under development for the early detection and improved management of lung, bladder, prostate and other cancers. The technology grew out of the company's eight license agreements with the Johns Hopkins University School of Medicine, of Baltimore.

Macdonald acknowledged Oncor's "balance sheet is not going to impress," but said its products, both approved and in the pipeline, do.

Oncor's first-quarter net loss totaled $8 million, up from $6.6 million for the same period in 1996. The company attributed the increase to an accounting charge of $2.2 million. Due to discontinuation of some production, sales declined to $3.2 million from $3.7 million.

Oncor closed a $10 million private placement in January and finished the quarter March 31 with $16.4 million in cash ,compared with $18.9 million at the beginning of the quarter.

The company's shares (AMEX:ONC) closed Monday at $3.938, down $0.062.

Oncor's lead product is a genetic breast cancer test designed to identify Her-2/neu gene amplification, an independent marker of breast cancer aggressiveness. The test identifies the one-third of node-negative breast cancer patients at high risk for early recurrence and death.

"Physicians can triage those patients at high risk for early recurrence and death," said Turner.

The test differs from the BRCA1/BRCA2 test created by Myriad Genetics Inc., of Salt Lake City. That test is designed to identify those who are genetically predisposed to developing breast cancer, while the Oncor product is geared toward managing patient care.

If approved, the Her-2/neu test -- and others like it -- lead to treatments better tailored to individual cases, Macdonald agreed.

"We're going to see a very quantitative, very qualitative diagnosis that involves gene-based probes," he said. "Every serious player in chemotherapeutics is going to have a program in gene-based diagnostics."

The company announced in May the completion of additional FDA-requested testing, along with development of a training program for those who administer the test. On June 10, Oncor said it had submitted an amendment to its premarket approval application for the Inform Her-2/neu test.

The Her-2/neu test has been approved in Canada, Australia, the U.K., Germany and elsewhere in Europe.

According to Turner, a "substantial market" awaits the product's launch in the U.S.

With the company receiving revenue of $100 per test, the product has a market potential in the U.S. of $120 million annually, Turner said. Projected 1997 European revenues total $1 million.

The company also is developing Her-2/neu as a molecular marker in the evaluation of prostate cancer.

Oncor owns about 30 percent of OncorMed Inc., of Gaithersburg, a molecular medicine services company; about 40 percent of Codon Pharmaceuticals Inc., also of Gaithersburg, a gene-based therapeutic company formerly called OncorPharm; and approximately 80 percent of Appligene S.A., of Strasbourg, France. *