By Debbie Strickland

Eli Lilly & Co.'s research and development budget has nearly doubled over the course of six years, jumping from $731 million in 1992 to an estimated $1.4 billion in 1997.

"We're expanding programs both internally and through collaborations," said James Kappel, a spokesman for the Indianapolis-based pharmaceutical giant.

Just this week, the company announced two biotechnology deals in two days -- a $70 million blockbuster with Cambridge, Mass.-based Millennium Pharmaceuticals Inc. (see the Millennium article on this page), and a smaller collaborative agreement with Megabios Corp., a privately held Burlingame, Calif., firm specializing in gene-delivery systems.

The Megabios partnership marks Lilly's first investment foray into gene-based therapeutics.

"This important collaboration will have a major impact on our ability to explore new forms of cancer treatment using our knowledge of important disease genes," said Homer Pearch, Lilly's vice president for cancer research and clinical investigation.

Under terms of the agreement, Lilly will receive global commercialization rights to a single drug in exchange for an equity investment, research funding for up to four years and milestone payments. The companies did not disclose financial details.

Megabios' other two partnerships are also with pharma powerhouses: Pfizer Inc., of New York, which signed an up-to-$50 million agreement to become an equity stakeholder and co-developer of intravenous gene therapy cancer treatments that inhibit blood vessel formation; and London-based Glaxo Wellcome plc, co-developer of a gene therapy treatment for cystic fibrosis. The Glaxo Wellcome project, initiated in 1994, has produced Megabios' first investigative new drug application, submitted to the FDA in April.

"The Lilly agreement . . . is a very narrow deal, involving a single gene for certain applications," Patrick Enright, vice president and chief financial officer told BioWorld Today.

The research will center on Megabios' platform technology of lipid-based gene delivery. The company has a portfolio of formulations that vary lipid type and ratio of lipid to DNA.

Lilly already has selected a gene to try as a treatment for "certain solid tumors" and will attempt to pair it with an effective Megabios-created delivery mechanism. The companies declined to name the gene or the targeted cancer(s).

"This partnership represents a major opportunity for the development of a gene-based therapeutic to treat certain cancers," said Benjamin McGraw III, chairman, president and CEO of Megabios.

Megabios, which completed a $10 million private financing in October, has $25 million in cash, with a burn rate of less than $5 million per year, Enright said.

Lilly's stock (NYSE: LLY) closed Thursday at $91.25, down $0.50. *