By Charles Craig

Genzyme Corp. negotiated two partnerships to expand its drug candidate pipeline with StressGen Biotechnologies Corp. for cancer gene therapy and with Cubist Pharmaceuticals Inc. for small molecule compounds targeting bacterial and fungal infections.

The deal with StressGen, of Victoria, British Columbia, involves a significant investment for formation of a C$20 million joint venture to develop cancer treatments using cellular stress proteins to rally an immune system attack against tumors.

Half of the first-year funding, C$10 million, will be provided by the Canadian Medical Discoveries Fund (CMDF), a London, Ontario, health care venture capital fund supported by government tax credits for investors.

Genzyme, of Cambridge, Mass., and StressGen also agreed to supply C$10 million either with their own funds or other investment capital.

Genzyme's deal with Cubist Pharmaceuticals Inc., also of Cambridge, does not involve any funding. Cubist will use its bacterial and fungal genetic targets to screen against Genzyme's compound libraries for new antibiotics.

Cubist will have access to Genzyme's library of 600,000 small molecules to test for activity against targets that include aminoacyl transfer RNA synthetases, which are enzymes involved in protein synthesis in bacteria and fungi. Disrupting the enzymes would lead to destruction of the pathogenic organisms.

Susan Whoriskey, Cubist's director of scientific licensing, said there are 20 different synthetases responsible for assembling amino acids into proteins in bacteria and fungi. Cubist has collaborations with Merck & Co., of Whitehouse Station, N.J., and Pfizer Inc. and Bristol-Myers Co., both of New York, in which the pharmaceutical companies licensed rights to different enzymes for screening against their compound libraries.

Whoriskey said in the Genzyme alliance, Cubist will use Genzyme's library of compounds to screen for activity against some protein synthesis enzymes as well as for other genetic targets being researched by Cubist.

Cubist To Use Genzyme's Library Of Compounds

Once potentially therapeutic compounds are found, Cubist and Genzyme will negotiate terms for their development.

Genzyme's stock (NASDAQ:GENZ) closed Wednesday at $24.375, up $0.125. Cubist ended the day at $11.375, down $0.125.

The joint venture between StressGen and Genzyme will combine the former's research on cellular stress proteins and the latter's development of viral and nonviral vectors to deliver the genes that express the proteins.

The cancer gene therapy joint venture will be part of Genzyme's new Molecular Oncology Division, whose formation was launched last month with the acquisition of PharmaGenics Inc., of Allendale, N.J. PharmaGenics worked with the p53 tumor suppressor gene and developed technology for analyzing gene expression patterns. (See BioWorld Today, Feb. 4, 1997, p. 1.)

StressGen's president and CEO, Richard Glickman, said the joint venture with Genzyme is his company's first major collaboration.

As their name implies, stress proteins are expressed by cells of all organisms as a protective mechanism when they are under stress.

For example, human cells express the proteins when subjected to cancerous growth, and bacterial cells express stress proteins when the microbes infect a person and come under attack by the human immune system.

StressGen is using stress proteins from bacteria and mammalian cells to rally the human immune system to attack a wide variety of diseases.

In the cancer collaboration with Genzyme, two strategies are being developed. Glickman said.

One plan involves delivering stress protein genes, either bacterial or mammalian, to tumor cells in cancer patients. The proteins are expressed on the surface of the tumor cells and signal the immune system for help. In addition, the proteins boost expression of tumor antigens not only in cells transfected with stress proteins, but in surrounding cancer cells. Those expressed antigens also stimulate an immune system attack.

The second plan involves systemic delivery of stress proteins combined with tumor antigens to coax the immune system into attacking the cancer.

StressGen-Genzyme Target: Lung Cancer

The initial program in the StressGen-Genzyme joint venture will be directed at lung cancer. Glickman said his company's most advanced gene therapy has focused on using stress protein genes from mycobacterium to activate the cancer patient's immune system against the tumors.

In financing the collaboration between Genzyme and StressGen, CMDF is making its largest biotechnology investment in its two-year history and is extending its earlier financial support of StressGen.

CMDF, Glickman said, owns about 1 million of StressGen's 23 million shares outstanding.

He said CMDF's investment in the Genzyme-StressGen joint venture will carry a reasonable flat rate of return and the opportunity to purchase limited warrants for StressGen and Genzyme shares.

If the gene therapy program makes clinical progress, StressGen and Genzyme have the option of buying out CMDF's investment after two years.

At the end of five years, if the joint venture is not progressing, StressGen and Genzyme can end the program and will be obligated to repay CMDF 40 percent of the original C$10 million investment.

Since it was founded in March 1995 to assist development of start-up health care firms in Canada, CMDF has invested in about 25 companies, about half of them biotechnology. Colin Deacon, a spokesman for the fund, said CMDF has $250 million in assets. Investors who keep their money in the fund for at least eight years receive tax credits from the Canadian and provincial governments.

The CMDF is a joint venture of the Medical Research Council of Canada, in Ottawa, and MDS Health Ventures Inc., Talvest Fund Management Inc. and CIBC Wood Gundy, all of Toronto. *