By Frances Bishopp

After some tough times for Scios Inc., which this year saw its lead drug, Auriculin, fail in Phase III trials and the probable demise of its partnership with Genentech Inc., the company has signed a research agreement with Eli Lilly & Co. in the area of Alzheimer's disease.

The goal of the agreement, whose financial terms were not disclosed, is to produce drugs which prevent or retard the progression of the disease. One aspect of the collaboration will be development of screening assays to identify compounds useful in the treatment of Alzheimer's disease.

Under terms of the agreement, Lilly, of Indianapolis, will fund research at Scios, of Mountain View, Calif., and will have the first opportunity to develop products from this collaboration. Scios may elect to develop other products from the alliance.

The commercializing partner will make milestone and royalty payments to the other partner and both companies may use the technology developed in the program.

Scios' stock dropped 30 percent in April when it stopped development of Auriculin, after it did not achieve its primary endpoint, dialysis-free survival, in a Phase III trial for the treatment of oliguric acute renal failure (ARF). Auriculin is a naturally occurring hormone produced in the atrium of the heart. Its benefit as a treatment for ARF (abnormally low urine output) was based on its ability to regulate blood flow through the kidneys.

Scios stock (NASDAQ:SCIO) closed Wednesday at $5.50, down $0.25.

Hopes are now pinned on Scios' next product in the pipeline, Natrecor BNP (B-type natriuretic peptide), a naturally occurring molecule believed to be part of the body's response to a failing heart. Scios is developing Natrecor as a treatment for acute congestive heart failure and the drug is currently in two Phase III trials, a 120-patient pivotal efficacy trial and a 300-patient safety study.

Scios, which is developing Natrecor alone, expects trial results by the end of 1997.

Scios was in partnership with Genentech on the development of Auriculin at the time of the Phase III results and the future of the collaboration will not be decided for several months.

Anne Bowdidge, manager of investor relations and corporate communications at Scios, told BioWorld Today in the original agreement Genentech had an option to pick up another natriuretic peptide from Scios' portfolio for acute renal failure.

Genentech, Bowdidge said, could test Natrecor for acute renal failure as the only indication. "They would have to start from the beginning for that product," Bowdidge said, 'but for all intents and purposes the partnership is pretty much dead."

Scios also endured more bad publicity recently when one of its shareholders, Stanley B. Price, of Mary Esther, Fla., who owns 4,500 shares of the company's 35 million shares, said he would vote his shares of Scios stock in support of his proposal urging the company's board of directors to appoint a special committee to seek buyers for the company.

Price's contention is the company's undervalued assets can best be deployed and shareholder value restored through a change in management.

His proposal was presented to a shareholder vote in the Scios proxy statement filed with the SEC in connection with the annual stockholders' meeting to be held on Tuesday.

Scios, in the proxy, said it did not believe Price's proposal would be in the best interests of the company's shareholders and in fact would reduce shareholder value.

Nearly identical proposals were submitted to a stockholder vote at both the 1996 and 1994 annual meetings and were soundly defeated.

Scios has no comment on the proposals. *