Genentech Inc. is investing up to $20 million in Xoma Corp. in acollaboration to develop Genentech's anti-CD11a monoclonalantibody.

Xoma, of Berkeley, Calif., will scale up the antibody and take itthrough Phase II studies. In return Genentech purchased about $9million in Xoma stock, at a premium price of $6 per share.

Genentech, of South San Francisco, will continue to funddevelopment through 1998 by giving Xoma a series of convertiblesubordinated loans that could bring the investment to more than $20million.

Xoma stock (NASDAQ:XOMA) gained 31 cents Monday to close at$5.75 after reaching a high of $6.38.

Assuming positive Phase II results Xoma either would co-develop theproduct or be paid for its work in a lump sum, said Ellen Martin,director of communications for Xoma. Potential milestones, beyondthe $20 million, are attainable for the most part at and after Phase II,she said.

Anti-CD11a is a humanized antibody that prevents activation of Tcells. It has potential applications as a treatment for organ transplantrejection and in certain inflammatory disorders, such as psoriasis.

Martin said the monoclonal antibody appears to be selective in how itswitches off T cells. Another potential benefit of the product is that itdoesn't require long-term dosing, she said.

The deal is a first for Xoma in terms of taking in another company'sdrug at this stage of development, Martin said, adding that Xoma'sexcess capacity and significant experience in monoclonal antibodiesattracted Genentech.

Arthur Levinson, president and CEO of Genentech, in a news releasesaid, "Genentech's pipeline of high-promise products is demandingthe full attention of our clinical development resources. Therefore,I'm delighted with this partnership with Xoma, which brings Xoma'simpressive GMP scale-up and clinical development capabilities tobear on the anti-CD11a project while reserving Genentech's ownresources for the many other products currently in development."

Martin said an investigational new drug application to begin humantrials likely will be submitted late this year or early next year.

Genentech will fund the program through a series of notes that areconvertible into Xoma non-voting preferred stock, which in turncould be converted to common stock.

Xoma had about $25 million in cash and equivalents at the end of thefirst quarter, and is spending about $2 million per month. It is in aPhase III trial of the anti-endotoxin monoclonal antibody E5 forgram-negative sepsis, and has a series of Phase II and open-labelstudies ongoing with Neuprex, a product derived frombacterial/permeability-increasing protein.

Genentech is working with San Diego-based IDEC PharmaceuticalsCorp. on another monoclonal antibody, an anti-CD20 product calledIDEC-C2B8. It is in Phase III studies for non-Hodgkin's B celllymphoma. n

-- Jim Shrine

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