Neurocrine Biosciences Inc. could receive up to $74 million in a dealwith Eli Lilly and Co. on the discovery of drugs for treatment ofobesity and Alzheimer's disease.

Gary Lyons, Neurocrine's president and CEO, said his San Diego-based company will receive $22 million in licensing fees over thenext three years. Lilly, of Indianapolis, also agreed to pay Neurocrineanother $49 million in milestone payments, which should be realizedwithin five years, and $3 million in research funds.

Lilly officials said of the $22 million in licensing fees, $10 millionwill be paid to Neurocrine in the first year.

Another important part of the deal, Lyons said, is Neurocrine willshare profits on marketed drugs in the U.S., which is similar to hiscompany's agreement with Ciba-Geigy Ltd., of Basel, Switzerland,on development of a multiple sclerosis drug.

In the collaboration with Ciba, which is merging with Sandoz Ltd., ofBasel, Neurocrine will share profits in North America. In both theLilly and Ciba partnerships, Neurocrine will be paid royalties onsales outside the U.S.

Unlike the potential $37 million Ciba partnership, which wasnegotiated in April 1996, the alliance with Lilly is a cash deal anddoes not involve an equity investment. Ciba has purchased $10million in Neurocrine stock.

The Lilly collaboration focuses on boosting levels in the brain of theneuropeptide, corticotropin releasing factor (CRF). Lower thannormal amounts of CRF have been associated with obesity andAlzheimer's.

In both conditions, Lyons said, Neurocrine's researchers found that inspecific regions of the brain controlling appetite and memory lossCRF levels are regulated by CRF binding protein. When CRFbinding protein is attached to CRF it is inactivated.

The drug discovery program with Lilly will attempt to develop small-molecule compounds that inhibit CRF binding protein, freeing CRFto carry out its signaling functions.

The drugs, Lyons added, would only boost CRF in targeted areas ofbrain, increasing it to normal levels, and would not affect theneuropeptide in other regions where too much CRF can be associatedwith other complications.

Neurocrine has a collaboration with Johnson & Johnson, of NewBrunswick, N.J., to develop drugs that block the CRF-1 receptor,lowering levels of CRF to treat anxiety, depression and substanceabuse. Lyons noted a drug candidate is expected to enter clinicaltrials next year in that alliance.

In theory, one compound could be developed to treat both obesityand the memory loss associated with Alzheimer's diseased based onpreventing CRF binding protein from attaching to CRF.

But Lyons said Neurocrine's researchers found that a CRF-relatedmolecule, called urocortin, also is trapped by CRF binding protein inregions of the brain controlling appetite. Urocortin, he added, appearsto be even more important than CRF as an appetite suppressant andmetabolism stimulant.

The discovery of urocortin likely will result in development of anobesity drug that is different in configuration from an Alzheimer'scompound. Clinical trials in both indications could begin by 1998.

Lyons said Neurocrine received inquiries from pharmaceuticalcompanies seeking to develop either an obesity treatment or anAlzheimer's therapy, but Lilly was the only drug maker interested indeveloping products for both conditions.

Lilly officials said clinical development will proceed at the same pacein both obesity and Alzheimer's disease.

Lilly has another Alzheimer's drug discovery collaboration withAthena Neurosciences Inc., of South San Francisco, which mergedearlier this year with Elan Corp. plc, of Athlone, Ireland.

Another important aspect of the Lilly alliance for Neurocrine, Lyonsobserved, is access to the pharmaceutical firm's chemical libraries toscreen for drug candidates targeting central nervous system diseasesand other CRF-related conditions outside the scope of the obesity andAlzheimer's collaboration.

For example, CRF is believed to have links to stroke, migraineheadaches and seizures. If Neurocrine identifies potential therapeuticcompounds and wants to seek development partnerships, Lilly wouldhave first right to negotiate separate alliances on those drugcandidates.

Neurocrine went public in May 1996, raising more than $44 millionat an initial public offering price of $10.50. Its stock(NASDAQ:NBIX) closed Monday at $11.125, up $0.375. Lilly'sstock (NYSE:LLY) ended the day at $68.75, an increase of $0.125. n

-- Charles Craig

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