By Charles Craig

Ribozyme Pharmaceuticals Inc. negotiated a potential $60 million collaboration with Germany-based Schering AG to discover drugs by using ribozymes, which are RNA molecules that act like enzymes, to zero in on specific disease genes for therapeutic intervention.

Ralph Christoffersen, president and CEO of Ribozyme Pharmaceuticals, said his company's technology goes beyond functional genomics to find the most important gene to counter in a disease pathway.

"Defining biological function of disease genes is important, but does not go far enough," he said. "For example, if you know all the genes in a particular disease pathway, that still doesn't tell you where the best target is."

Christoffersen's Boulder, Colo.-based company was to announce the Schering alliance today. Of the $60 million involved in the deal, $25 million are guaranteed to Ribozyme Pharmaceuticals over the next five years.

Schering, of Berlin, agreed to make a $5 million equity investment over the next year; to lend Ribozyme Pharmaceuticals $10 million over five years; and to pay another $10 million in research funding over five years. The loans, Christoffersen said, are convertible to Ribozyme common shares.

Ribozyme Pharmaceuticals will receive the other $40 million in "success fees" and drug development milestone payments.

The company will take expressed gene sequences, which are mRNA molecules, provided by Schering and synthesize ribozymes to block the mRNA from completing its task of making a protein. Those ribozymes then are used in cell cultures or animal models of disease to determine how the disabled gene affects the course of the malady.

"We will be screening large numbers of gene sequences involved in a broad range of diseases," said Christoffersen, who described the process as "target validation."

The success fees paid by Schering, Christoffersen said, relate to identifying genetic targets for drugs. "If they had 10 sequences they thought were involved in a disease," he explained, "we would develop ribozymes to inhibit each one and if one of them changed the course of the disease that would generate a success fee."

The target validation part of the agreement with Schering, Christoffersen added, represents Ribozyme's strategy of providing that particular service on a non-exclusive basis for clients who want to determine which of their gene sequences constitutes the best point for therapeutic intervention.

Once a target gene sequence is identified, the ribozyme created to block it could be used as a drug, or another kind of agent could be developed.

In the Schering alliance, it will have exclusive rights to the ribozymes identified for its genetic targets, but if the pharmaceutical company chooses to make another type of drug, ownership of the ribozymes reverts to Christoffersen's firm.

Christoffersen estimated it would take his company 12 to 18 months to validate a drug target from among a group of expressed gene sequences.

Ribozyme Pharmaceuticals also is working with Chiron Corp., of Emeryville, Calif., for development of ribozymes to treat HIV. The companies are conducting a Phase I/IIa trial with a gene therapy to make immune system cells resistant to HIV infection.

Ribozyme's stock (NASDAQ:RZYM) closed Friday at $10.25, down $0.625. *