Sugen Inc. is getting $13 million from a Germanpharmaceutical company in a deal related to Europeandevelopment of cancer products based on cell signaltransduction targets.

The deal with ASTA Medica AG, of Frankfurt, alsoincludes potential milestone payments of $19 million toSugen, royalties on sales and access to ASTA's smallmolecule collection. A significant part of thecollaboration for Sugen is its retention of rights in NorthAmerica and Asia.

Announced Wednesday, the deal is based on Sugen'swork on the HER2 receptor tyrosine kinase, which isimplicated in a number of breast and ovarian tumors, andon Raf, an intracellular signaling molecule. Both areseparate from the areas Sugen is working on with ZenecaGroup. That collaboration involves earlier-stage researchof cancer drugs targeting cell-surface receptors andintracellular signal transduction pathways.

ASTA, a company of the German chemical groupDequssa AG, is purchasing $9 million in Sugen stock at$20.88 per share, a premium of about 100 percent toSugen's recent average price. ASTA also is paying a $4million technology set-up fee as well as additionalconsideration in the form of contract services.

Sugen's stock (NASDAQ:SUGN) gained $1.88, or 16percent, to close at $12.38 Wednesday.

Sugen, of Redwood City, Calif., previously reported ithad lead in vivo compounds in its small molecule HER2inhibitor program. The Raf inhibitor program is earlierstage. ASTA's primary focus is in cancer.

"We'll be deeply involved, but given ASTA's expertisein pharmaceutical development, we're quite happy tohave them take a prominent role in these two programs,"said Sugen President Jim Tyree. "They are now in ashared decision-making role on which compounds will gointo an IND [investigational new drug] mode."

Taking on ASTA as a partner benefits Sugen in a numberof ways, both for that program and for others it isworking on.

ASTA immediately will take on preclinical and clinicaldevelopment of Sugen compounds in Europe to be doneto U.S. standards. That will give Sugen a leg up when ittakes any products into the clinic in the U.S.

"This is a significant investment for ASTA," Tyree said."That should be a good indication of what we shouldexpect from this company. We think it will be a highpriority.

"This is one of their first biotechnology investments, ifnot their first one," Tyree said.

The deal also strengthens Sugen's cash position now, anddown the road as its partner helps offset developmentcosts. It also was in line with Sugen's strategy ofestablishing a fully integrated North American businessin cancer.

Sugen's most advanced compound, SU101, recently wastaken into Phase I studies. The small moleculecompound, which is designed to block activation ofplatelet-derived growth factor, is being developed forcancer indications.

Sugen on Sept. 30, 1995, reported about $46 million incash and short-term investments, now supplemented bythe $13 million from ASTA. Sugen's net 1995 loss isexpected to be less than $12 million.

Post-deal Sugen will have about 10.6 million sharesoutstanding, with ASTA holding about 4 percent. Thestake of London-based Zeneca decreased slightly fromthe 19.9 percent position it held. n

-- Jim Shrine

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