By Charles Craig

Germany-based Fresenius AG has agreed to pay Genzyme Transgenics Corp. $17 million to create a herd of cows genetically modified to produce in their milk commercial quantities of serum albumin, the major plasma protein used for replacing blood volume lost as a result of injuries, surgery or other medical treatments.

Albumin currently is derived from donor plasma, which carries with it a risk of viral contamination. Worldwide sales are estimated at $1.3 billion.

Fresenius, of Bad Homburg vor der Hohe, Germany, will make an undisclosed up-front payment followed by development funding and milestone and option payments for a total of $17 million. The German firm, which sells kidney dialysis equipment and nutritional and pharmaceutical products, also will conduct clinical trials and market the albumin.

Genzyme Transgenics will supply Fresenius with the protein and receive royalties on sales.

Michael Young, Genzyme Transgenics vice president of commercial development, said the process of microinjecting cow embryos with the human gene for albumin is under way. Of thousands of embryos altered, about 1,000 will be implanted in cows.

Young said about 5 percent to 10 percent of the thousand cows carrying the modified embryos will give birth to transgenic offspring for albumin production.

Those transgenic cows also will serve as the founders for the transgenic herd of 1,000 to 2,000 bovine needed to produce commercial quantities of the human protein. The first transgenic calves are expected to be born in late 1997 or early 1998.

Genzyme Transgenics is working with an undisclosed company to produce the first transgenic cows.

Young said Genzyme Transgenics has not ruled out adult cloning to generate a transgenic herd. "We are looking at cloning," he said. "But we have made no decision."

Based on the recent cloning of an adult sheep by scientists at Roslin Institute and PPL Therapeutics plc, near Edinburgh, Scotland, the possibility may exist for creating several clones of adult cows that produce the most human protein and then use those animals to breed a super-
transgenic herd of albumin producers.

Not only is production of albumin in transgenic cows expected to reduce risk of viral contamination from donor plasma now used to make the protein, but the transgenic method also is expected to be less costly.

Genzyme Transgenics' stock (NASDAQ:GZTC) closed Friday at $9.25, up $0.75. *