ChemGenics Pharmaceuticals Inc. could receive up to $70 millionover the next five years from America Home Products Corp. in adrug discovery collaboration aimed at finding new classes ofantibiotics based on the companies' bacterial gene discoveries.

The partnership is the first for ChemGenics, of Cambridge, Mass.,since it was formed in May 1996 through a combination of MycoPharmaceuticals Inc., a Cambridge genomics firm, and the drugdiscovery group at PerSeptive Biosystems Inc., also of Cambridge.

Myco changed its name to ChemGenics, which is privately held, andPerSeptive received a 40 percent equity stake with a warrant to boostits ownership to 50 percent.

American Home Products, of Madison, N.J., joins Pfizer Inc., of NewYork, as a partner in ChemGenics. In 1995 Pfizer began acollaboration with Myco for anti-fungal drugdiscovery. Both pharmaceutical firms have significant equity interestsin ChemGenics described as "less than 20 percent."

In its collaboration with ChemGenics, American Home Productsmade an initial undisclosed equity investment. The drug maker willbuy additional stock and contribute research funding, some of whichis tied to the collaboration's progress, during the first phase of thepartnership. Financing from equity purchases and research allocationscould total $37 million.

The other $33 million from American Home Products is dependenton achievement of drug development milestones. The two companiesexpect to have a drug candidate ready for clinical trials within fiveyears.

ChemGenics will work with the King of Prussia, Pa.-based Wyeth-Ayerst Laboratories division of American Home Products in fourundisclosed "component areas."

Barry Berkowitz, ChemGenics president and CEO, described theareas as "four different product profiles" based on discovery of"more than dozen" new bacterial genetic targets.

The antibacterial drug discovery programs will include "newapproaches to broad spectrum antibiotics and new approaches togram positive antibiotics," he added.

The growing problem of drug resistant bacteria has intensified thesearch for new antibiotics.

ChemGenics, Berkowitz said, has both genomic and drug discoverytechnologies. The company's research involves analysis of genes andtheir functions to identify potential genetic targets, which are thenincorporated into drug screens to test against potentially therapeuticmolecules derived from its collection of more than 50,000 fungalorganisms.

However, both American Home Products and ChemGenics willcontribute bacterial genetic targets and compounds in theircollaboration. The research will focus on identifying previouslyundiscovered and uncharacterized bacterial genes that can serve astargets to destroy the pathogens.

"This is one of the broadest alliances in antibacterial drugdevelopment between a biotechnology company and apharmaceutical company," Berkowitz said. "This is not just a genediscovery deal. It's a drug discovery deal."

The American Home Products partnership targeting bacteria, he said,represents the second application of ChemGenics' "Drug DiscoveryGenomics" and "Advanced Drug Selection Technologies." Theformer technology is used to identify genes essential for bacterial cellfunction. The latter employs that information to select compounds _which counteract those genes _ from large combinatorial chemistryand natural product libraries.

The collaboration with Pfizer involves genetic analysis of fungi tocreate anti-fungal drugs and is worth up to $50 million toChemGenics. Pfizer agreed to make equity an equity investment andprovide research funds totaling $20 million and to contribute up to$30 million more in milestone payments.

PerSeptive Biosystems' stock (NASDAQ:PBIO) closed Tuesday at$7, up $0.375. American Home Products (NYSE:AHP) ended theday down $0.375 to $64. n

-- Charles Craig

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