By Charles Craig

Financially-strapped Somatix Therapy Corp. may have found a rescuer for its gene therapy programs in Cell Genesys Inc., another gene therapy company that reportedly is moving to buy out the struggling firm.

Officials of both companies would neither confirm nor deny rumors of a merger.

Somatix was scheduled to make a business presentation at Hambrecht & Quist's 15th Annual Healthcare Conference, which ended last Thursday, but withdrew from the meeting.

Stephen Sherwin, Cell Genesys' chairman, president and CEO, made no mention of a Somatix takeover in his presentation Wednesday to the institutional and venture capital investors attending the Hambrecht & Quist conference. He declined to answer BioWorld Today's questions about Somatix following his appearance.

Contacted at his Alameda, Calif., office, Somatix Chief Financial Office Edward Lanphier said the company has a policy against discussing rumors.

However, sources at the Hambrecht & Quist conference told BioWorld Today the acquisition of Somatix by Cell Genesys, of Foster City, Calif., is expected to be officially announced in the next several weeks.

In October 1996, Somatix, short of cash, postponed a Phase III trial of its lead cancer vaccine and reduced its work force while it searched for a corporate partner for the program.

At the end of its fiscal year, June 30, 1996, Somatix reported a net loss of $21 million and said it had $6.7 million in cash.

Filings with the Securities and Exchange Commission in October 1996 showed Somatix bolstered its cash position with $5 million through the sale of preferred stock and negotiated an option to sell another $10 million worth of preferred stock over the next three years.

Analysts expected Somatix to find a corporate partner for its GVAX cancer program by the end of January 1997. The therapeutic vaccine is made by removing tumor cells from a patient and genetically modifying them to stimulate an immune system response against the cancer when the cells are reinfused.

Somatix's gene therapy technology and patents would fit well with Cell Genesys' programs.

Cell Genesys' most advanced product is an ex vivo AIDS gene therapy being evaluated in Phase II trials. The company is developing the treatment in a potential $160 million collaboration with Hoechst Marion Roussel, of Frankfurt, Germany.

The treatment involves removing an AIDS patient's killer T cells and genetically modifying them to attack and destroy HIV-infected CD4 cells.

At his Hambrecht & Quist presentation, Sherwin said Cell Genesys also is beginning a cancer gene therapy program. He added the company expects to file an investigational new drug application with the FDA in the second quarter of 1997 to begin clinical trials.

Cell Genesys, Sherwin said, is developing both ex vivo and in vivo gene therapy products. He noted his company was expected to end 1996 with $85 million in cash and revenues of $25 million.

Somatix also has technology for ex vivo and in vivo gene therapy. It expanded its gene therapy capabilities in December 1994 with the acquisition of Merlin Pharmaceutical Inc., of New York.

In addition to cancer, Somatix's gene therapy programs target central nervous system diseases and blood-related disorders.

The company has developed retroviral, adenoviral and adeno-associated viral vectors. It also is studying use of hematopoietic stem cells and synthetic vectors, such as lipid-based systems, for gene delivery.

Another attraction for Cell Genesys may be Somatix's patent position in gene therapy. One of Somatix's broad patents covering ex vivo gene therapy with epithelial cells has withstood challenges in Europe.

And the U.S. Patent and Trademark Office last year began a review to determine whether the sweeping ex vivo gene therapy patent jointly issued in 1995 to Genetic Therapy Inc., of Gaithersburg, Md., and the National Institutes of Health, in Bethesda, Md., interferes with Somatix's U.S. patents.

After Genetic Therapy was awarded its patent, Sandoz Ltd., of Basel, Switzerland, paid $295 million to acquire the biotechnology firm. Sandoz in 1996 merged with fellow Basel drug maker Ciba-Geigy Ltd. to form Novartis.

Cell Genesys stock (NASDAQ:CEGE) closed Friday at $9.125, up $0.125. Somatix (NASDAQ:SOMA) gained $0.125 to close at $3.812. *