Biogen Inc., making its biggest investment ever to acquire a new drugcandidate, agreed to pay Creative BioMolecules Inc. up to $122.5million for rights to develop and market a potential tissueregeneration drug for acute and chronic renal failure.

The Creative BioMolecules' product, recombinant osteogenicprotein-1 (OP-1), already is in late-stage clinical development withStryker Corp., of Kalamazoo, Mich., for regenerating bone tissue innon-healing fractures and is in preclinical studies for regrowingcartilage.

OP-1 is called a morphogenic protein and is part of the transforminggrowth factor-beta superfamily. OP-1 assists embryonic cells in theirdifferentiation into more specific cells that make up tissues andorgans of the body. In adults, the protein and other TGF-beta factorsare believed to combine to trigger formation of new tissue.

For renal failure, Creative BioMolecules President and CEO MichaelTarnow said OP-1, which is produced inkidneys, is viewed as a means of slowing degeneration by haltingkidney cell death. While a potential for tissue regeneration may exist,Tarnow added, he is more cautious about making such claims beforeclinical trials have assessed the protein's effectiveness in failingkidneys.

Cambridge, Mass.-based Biogen was sufficiently convinced of OP-1's likely clinical success to make a major financial commitment toCreative BioMolecules, of Hopkinton, Mass.

Biogen will pay $28 million up front: a $10 million fee for access tothe technology and an $18 million equity investment that gives it a4.7 percent stake in Creative BioMolecules. Biogen is buying morethan 1.5 million Creative BioMolecules shares at $11.67 per share,which represented a 15 percent to 20 percent premium to the stock'strading price several weeks ago when the agreement was reached.

Creative BioMolecules shares (NASDAQ:CBMI) closed Tuesday at$11.75, up $1.75, a 17.5 percent jump. Biogen (NASDAQ:BGEN)gained $1 to end the day at $43.

Biogen also will provide Creative BioMolecules $10.5 million inresearch funding, distributed equally over three years. And part of thefunding is a $15 million line of credit, which Creative Molecules candraw on to support its research for development of small moleculesthat mimic OP-1 or induce its production.

Biogen has an option on rights to the small molecules for renalapplications and would have to pay additional licensing fees toCreative BioMolecules.

The other $69 million in the deal is tied to worldwide clinicaldevelopment milestones.

"If we pay the full $122.5 million," said Richard Lundberg, managerof Biogen's investor relations, "that means we will have a drug on themarket in the U.S., Europe and Japan."

Tarnow said the program with Biogen is expected to generate $60million over the next three years for Creative BioMolecules.

About 300,000 people in the U.S. have chronic renal failure that hasprogressed to loss of kidney function. The vast majority are treatedwith dialysis, but others receive kidney transplants. CreativeBioMolecules said hundreds of thousands more suffer from chronicdegeneration that has not reached end-stage disease.

Another 250,000 people are victims of acute renal failure caused byrapid kidney function loss that normally occurs in a hospital and isrelated to other procedures.

Largest Biotech-Biotech Deal Of 1996

The collaboration between Biogen and Creative BioMolecules maybe the biggest biotech-biotech deal this year. Another that approachesit in financial scope is Biogen's alliance in July with Ontogeny Inc.,of Cambridge, Mass., paying Ontogeny up to $90 million for rights todevelop three hedgehog proteins, which like OP-1 are involved intissue and organ formation.

Although hedgehog proteins are not part of the superfamily of TGF-beta factors, they interact during the embryonic stage of humandevelopment and are responsible for giving structure and form to thetissues and organs of the body.

Developmental biology, which includes the study of those proteins, is"the hottest field" in the biotechnology business, said CreativeBioMolecules' chief scientific officer, Charles Cohen.

The Creative BioMolecules and Ontogeny alliances represent a majormove by Biogen into developmental biology.

Cohen observed the potential for the science to generate newtreatments, such as regenerating tissue, is enormous.

"If we understand what happens in development of the embryo,"Cohen said, "that information will be useful in trying to recapitulatethat biology in adults."

Creative BioMolecules' OP-1 is more advanced in therapeuticdevelopment than Ontogeny's hedgehog proteins.

Biogen is expected to begin clinical trials with recombinant OP-1protein in about a year.

In acute renal failure OP-1 would be used to prevent damage tokidneys compromised by other procedures, such as surgery thatcaused an ischemic event. Typically, those patients are placed ondialysis for several days and kidney function is restored, but forthousands the damage can be permanent and deadly.

For chronic renal failure, OP-1 is proposed as a means of stabilizingor slowing kidney degeneration to hold-off the need for dialysis,which costs the Medicare system about $10 billion a year.

Tarnow said the Biogen collaboration is the most lucrative to date forhis company. With deals for OP-1 in bone formation and kidneyfailure, he said the next application of the multi-purpose protein's cellprotecting and regenerating powers likely will be for neurologicaldisorders.

Stryker, which has been working with Creative BioMolecules since1985, is expected to file for market approval next year for use of OP-1 in a paste-like formulation to regenerate bone in treating fractures.Stryker also has preclinical trials under way with the protein forcartilage regrowth. In November, the company negotiated anothercollaboration with Creative BioMolecules for use of OP-1 in dentalapplications, such periodontal tissue regeneration. n

-- Charles Craig

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