Hoechst Marion Roussel agreed to pay Cell Genesys Inc. up to $26million for its gene activation technology to produce two proteindrugs, one of which is erythropoietin, a red blood cell booster used totreat anemia.

The deal represents Hoechst Marion Roussel's second license fortechnology to help it enter the lucrative market for therapeuticproteins, particularly erythropoietin, or EPO. TranskaryoticTherapies Inc., of Cambridge, Mass., owns the other gene activatedprotein production technique licensed by Hoechst Marion Roussel, ofFrankfurt, Germany.

Both gene activated technologies involve stimulating production oftherapeutic proteins in human cells, which otherwise would notproduce them, as a means of avoiding intellectual propertyrestrictions on marketing the drugs.

Therapeutic proteins, such as EPO, insulin and growth hormone,currently are made by patented recombinant technologies involvingintroduction of cloned human genes in non-human cells.

Hoechst Marion Roussel's alliances with Cell Genesys, of FosterCity, Calif., and Transkaryotic Therapies license their technologiesspecifically for EPO.

If successful in getting to market with the red blood cell booster,Hoechst Marion Roussel would compete with Amgen Inc., ofThousand Oaks, Calif., which developed the recombinant version,and its partner, Johnson & Johnson, of New Brunswick, N.J.

However, some Wall Street analysts have suggested the battle'sinitial front will be the courthouse with litigation over patent rights.

In its deal with Cell Genesys, Hoechst Marion Roussel, a subsidiaryof Frankfurt-based Hoechst AG, paid $4 million up front and willcontribute another $22 million in milestone payments.

Hoechst Marion Roussel is expected to enter clinical trials in 1997with a Transkaryotic Therapies gene activated EPO drug. Plans fordevelopment of a Cell Genesys gene activated EPO drug were notdisclosed. Hoechst Marion Roussel officials also would not discussdifferences or similarities in the Transkaryotic Therapies and CellGenesys technologies.

The pharmaceutical company's deals with Cell Genesys andTranskaryotic involve a second protein, but in each instance it has notbeen identified.

The alliance with Hoechst Marion Roussel is Cell Genesys' second.The two companies are collaborating on an AIDS gene therapy thatcould be worth up to $160 million to Cell Genesys. The deal includedan equity investment, giving Hoechst a 13 percent stake in CellGenesys.

Cell Genesys' chief financial officer, Kathleen Glaub, said hercompany has received $45 million from Hoechst since the AIDSprogram began in October 1995. The gene therapy involvesgenetically modifying killer T cells to destroy HIV-infected immunesystem cells.

In Cell Genesys' gene activation technology, regulatory DNAelements are inserted into chromosomes to turn-on the generesponsible for expressing the specific protein of interest.

Akzo Nobel Pharma Group, of Arnhem, the Netherlands, was thefirst company to collaborate with Cell Genesys on a gene activationproduct. In 1994, the two signed an agreement for development offollicle-stimulating hormone (FSH) for treatment of infertility.

In addition to releasing news of the Hoechst deal, Glaub also saidThursday Akzo paid Cell Genesys $5 million to end that alliance andreturn rights to gene activated FSH.

Akzo had developed a recombinant version of FSH and it beganselling that product recently following settlement of a patent fightwith Ares-Serono, of Geneva.

Akzo retains a non-exclusive license to Cell Genesys' gene activationtechnology.

Cell Genesys' stock (NASDAQ:CEGE) closed Thursday up $0.875to $8.37. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.