By Charles Craig

Less than a month after proposing a public offering of 2 million shares, Alkermes Inc. found a single buyer for the securities in Alza Corp., which agreed to pay $25 per share for a total $50 million investment.

Alkermes, of Cambridge, Mass., will withdraw its public offering. The equity purchase gives Alza, of Palo Alto, Calif., a 9.7 percent stake in Alkermes.

Both companies develop sustained-release drug delivery systems, which are designed to reduce frequency of administrations.

Alza, founded in 1968, has targeted traditional pharmaceuticals. Alkermes, launched 10 years ago, creates delivery vehicles for transport of drugs into hard-to-penetrate areas of the body and for sustained release of large unstable molecules, such as the protein and peptide drugs developed by biotechnology firms.

Alza spokesperson Anneke Cole said the company's biggest selling product is Procardia XL, an extended-release form of the hypertension drug, developed for Pfizer Inc., of New York. Royalties from Procardia XL sales generate 40 percent of Alza's total revenues.

Alza also developed the transdermal patch used in Nicoderm CQ, an over-the-counter version of the smoking cessation product sold by SmithKline Beecham plc, of London.

Alkermes' stock (NASDAQ:ALKS) was trading at $22.125 when the company registered for the public offering in January. The $25 per share paid by Alza represents a 13 percent premium.

Alkermes shares closed Friday at $27, up $4.25. Alza (NYSE:AZA) finished the day at $30, down $.75.

In addition to the equity purchase, Alza is seeking access to Alkermes drug delivery technology. The two agreed to work on a project, but have not decided on details.

The collaboration will involve additional funding from Alza and will focus on one of two Alkermes' systems, either ProLease or Medisorb. A deal is expected to be complete before the end of the first quarter.

Alkermes' ProLease drug delivery technology uses a polymeric microsphere, similar to dissolving sutures, to achieve sustained release and biological activity of proteins and peptides.

Medisorb, a delivery system employing polymers similar to those used in ProLease, is designed for traditional small molecule drugs. The Medisorb technology was acquired by Alkermes in a $4 million takeover in 1996 of Technologies International L.P., of Cincinnati.

Following Alza's 2 million share purchase, Alkermes has 20.5 million shares outstanding. Alkermes ended 1996 with $44 million in cash. The company's fiscal year ends March 31. For the last three quarters of 1996, Alkermes reported a net loss of $13.9 million.

In addition to ProLease and Medisorb, Alkermes is developing another drug delivery system, called RMP-7, designed to transport compounds across the blood-brain barrier. RMP, which stands for receptor-mediated permeabilizer, is a synthetic analogue of bradykinin, which is a naturally occurring molecule with vascular permeability properties.

Alkermes' most advanced product is the combination of RMP-7 and chemotherapeutic agent carboplatin, for brain cancer. Results of two European Phase II trials, reported in December 1996, demonstrated the treatment was well tolerated and achieved positive responses in patients.

Alkermes has ProLease collaborations with Genentech Inc., of South San Francisco, for delivery of its growth hormones; with Schering-Plough Corp., of Madison, N.J., for Intron A; and with Johnson & Johnson, of New Brunswick, N.J., for an undisclosed hormone.

Alkermes also is working with Johnson & Johnson on the Medisorb delivery of an undisclosed small molecule compound.

Underwriters for Alkermes' public offering were Robertson, Stephens & Co. LLC, Montgomery Securities and Cowen & Co., all of New York. *