Cantab Pharmaceuticals plc could receive as much as $37 million in asingle product deal with London-based SmithKline Beecham plcaimed at development of a vaccine against genital warts.

SmithKline _ through its subsidiary, SmithKline BeechamBiologicals Manufacturing SA, in Rixensart, Belgium _ agreed topay Cantab, of Cambridge, U.K., $4.6 million in license fees and tomake a $6.2 million equity investment. Cantab could receive another$26.2 million in milestone payments and will be paid royalties on themarketed product.

SmithKline acquired worldwide rights to the vaccine, which is inPhase II trials in the U.K., and will fund the remaining clinicaldevelopment and the regulatory approval applications.

SmithKline purchased 470,000 shares of Cantab at a 33 percentpremium to the stock's average trading price during the first twoweeks of this month. The investment gives SmithKline a 3 percentinterest in Cantab, whose stock trades on the London Stock Exchangeand NASDAQ. Shares (CNTBY) closed Thursday on NASDAQdown 37 cents to $9.

The SmithKline deal represents the first pharmaceutical collaborationfor Cantab since the company suffered a setback in March 1995 whena monoclonal antibody to prevent kidney transplant rejection failed toachieve efficacy in clinical trials. That program, which wasdiscontinued, was partnered with Baxter Healthcare Corp., ofDeerfield, Ill.

Over the past year Cantab steadily has improved its financial positionsigning a potential $45 million agreement with Pfizer Inc., of NewYork, for veterinary applications of Cantab's disabled infectioussingle cycle (DISC) virus technology. That pact included an equityinvestment by Pfizer giving it an 8 percent stake in Cantab.

And earlier this year, Cantab raised nearly $40 million in a publicoffering.

"We experienced a difficult period in terms of our share price," saidPaul Haycock, Cantab's CEO, "but we never had any doubts aboutour fundamental technology."

Haycock said Cantab now has "three years plus" worth of cash.

The genital warts vaccine candidate and DISC technology, whichalso is designed to stimulate immune system responses against viralinfections, represent Cantab's two major drug developmentprograms.

The vaccine against genital warts is derived from the company'sexpertise and patents on research into the human papillomavirus(HPV), which exists in about 70 different strains.

Cantab takes two proteins from genes in HPV strains responsible forgenital warts and combines them with an adjuvant to generate animmune system assault on the virus. The TA-GW (therapeuticantigen-genital warts) vaccine contains a protein involved in thestructure of HPV and a protein for viral replication in infected cells.

More than one million new cases of the sexually transmitted genitalwarts are diagnosed each year in the U.S. and Europe. Currenttreatments, Cantab officials said, do not attack the underlyinginfection responsible for the warts.

Cantab has two other HPV-based vaccines in development: TA-HPVfor cervical cancer is being evaluated in Phase II and TA-CIN(cervical intraepithelial neoplasia) for precancerous cervical lesionsis in preclinical studies.

Haycock said drug companies have expressed interest in the cervicalcancer and cervical dysplasia vaccines. With Cantab's renewedfinancial vigor, he added, the company can choose its partnerscarefully and negotiate without any pressure.

Cantab's DISC vaccine technology uses genetically engineeredviruses that are disabled to prevent them from spreading in the body.Cantab recently received regulatory approval to begin clinical studieswith a DISC herpes simplex virus to stimulate an immune systemattack on genital herpes. Other DISC development programs areunder way for cancer and for use of disabled viruses as vectors forgene therapy.

Pfizer in September 1995 paid Cantab $10 million up front andagreed to make up to $35 million in milestone payments fordevelopment of animal vaccines with the DISC technology. n

-- Charles Craig

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