Elan Corp. plc invested $20 million in Cytogen Corp. to helpcapitalize a new company focused on quickly developing andmarketing oncology products.
The new company, Targon Corp., will start as a wholly ownedCytogen subsidiary. Elan has the option to convert some of its initialinvestment into half ownership of the new company or into Cytogencommon stock.
The new company will use $10 million of the proceeds to acquire totwo products from Elan affiliate Advanced Therapeutic Systems Ltd.The products, EL530 and EL532, are in clinical trials for treatingsolid and hematologic tumors. Three other products that make upTargon's initial pipeline are Prostatec and Oncotec, two second-generation cancer diagnostics being developed by Cytogen, andCytogen's preclinical prostate specific membrane antigen technology.
Cytogen, of Princeton, N.J., will use $5 million of the Elaninvestment as its cash contribution to the new company. For that $5million Elan, a drug delivery specialist based in Athlone, Ireland,bought about 930,000 common shares of Cytogen.
The other $15 million in Elan's investment went to purchase Series Aconvertible preferred stock. Elan can exchange the Series A stock forhalf interest in the new company and get a warrant to purchase up to1 million Cytogen common shares for $8.40 to $14 each. Or Elancould exchange the Series A stock for up to 1.8 million Cytogenshares (reducing over time). If that option is taken Cytogen keeps fullownership of Targon.
Cytogen stock (NASDAQ:CYTO) gained 63 cents Friday to close at$6.19.
"It is expected Elan will convert into 50 percent ownership ofTargon," said Cytogen Vice President Pamela Murphy. "The spirit ofthe alliance is joint development in a joint company." A primaryobjective for Targon is to in-license late-stage oncology products, shesaid.
The new company combines Elan's expertise in drug delivery andenhanced formulation with Cytogen's clinical and regulatoryexperience.
"The new company creates a unique combination of competenciesand provides an effective and efficient development channel fordifferentiated oncology products," said Michael Sember, Elan's vicepresident of planning, investments and development. He will beTargon's chairman and CEO. Cytogen's vice president of medicalaffairs, Robert Maguire, will be Targon's executive president andchief scientific officer.
Elan and Cytogen began a collaboration in December 1995. Elanprovided $3 million for the first year of research, which is aimed atusing Elan's drug delivery systems for peptide compounds derivedfrom Cytogen's genetic diversity library technology. A goal is todevelop oral formulations of injectable drugs.
Cytogen's approved product OncoScint, an indium-labeledmonoclonal antibody for detecting colon and ovarian cancer, is notpart of the new company. Nor are two products under review by theFDA: ProstaScint, a similar product for prostate cancer that wasrecommended for approval; and Quadramet, a radiopharmaceuticaldesigned to alleviate severe bone pain associated with certaincancers. A new drug application was filed for Quadramet in August1995.
The second-generation products Prostatec and Oncotec usetechnetium instead of indium. Technetium costs less and has a shorterhalf-life, which would provide quicker scan results, Murphy said.
EL530 (phenylacetate) and EL532 (phenylbutrate) are aromatic fattyacids that have shown tumor differentiating activity. The NationalCancer Institute is directing studies of both agents. EL530 hasundergone Phase II trials in a variety of tumor types, while EL532 isnear the end of a Phase I study. Elan said it is likely one of the twodrugs will be selected for Phase II/III trials in patients with gliomas,hematologic malignancies or maybe pancreatic cancer, withadditional tumor types expected to be targeted afterward. n
-- Jim Shrine
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