La Jolla Pharmaceutical Co., searching for a Europeanpartner and unwilling to give up North American rights tosign one, found what it wanted in a Danish company thatagreed to pay up to $40 million to co-develop the SanDiego-based firm's lupus drug.

Leo Pharmaceutical Products Ltd., of Ballerup, Denmark,will pay La Jolla $3 million up front, assume about 50percent of worldwide development costs and makemilestone payments.

Steven Engle, president and CEO of La Jolla, saidWednesday the research and development agreement forthe lupus compound, called LPJ 394, is worth $40 millionto his company. The product candidate is La Jolla's leaddrug and is in Phase II trials in the U.S.

The deal with Leo, which gets marketing rights in Europeand the Middle East, is La Jolla's first major corporatepartnership. In addition to receiving research anddevelopment funds, La Jolla will get royalties and fees formanufacturing LJP 394.

The agreement also is the first U.S. biotechnologycollaboration for Leo, which is Europe's biggest producerof heparin and also makes drugs for chronic kidneydisease and psoriasis.

La Jolla's stock (NASDAQ:LJPC) closed Wednesday at$5.63, up 25 cents.

Engle said La Jolla talked with larger pharmaceuticalfirms, but wanted a partnership limited to Europe with acompany committed to an aggressive development effort.

"We didn't want to be the 99th product on the list," hesaid, "and we talked with some big companies but theywanted everything."

La Jolla retains rights to LJP 394 outside Europe and theMiddle East. Engle said La Jolla will seek a partner forJapan, but expects to sell the drug itself in the U.S.

The collaboration with Leo, Engle added, significantlybolsters La Jolla's cash position. With a $3 million up-front payment from Leo, La Jolla currently has $19million in cash and a burn rate of $11 million a year.

LJP 394, designed to treat lupus nephritis, was developedwith La Jolla's Tolerance Technology, which makesmolecules that bind to the surface of specific B cells,shutting off their production of disease-causingantibodies. The drug targets antibodies to double-strandedDNA, which are believed to cause kidney disease, themain killer of lupus patients.

In April, La Jolla reported LPJ 394 was well tolerated intreatment of four lupus patients who participated in thefirst segment of the company's Phase II trials.

The four patients also experienced reductions inantibodies linked to the disease, but data on the findingshave not been presented. Engle said those results will bereleased next month at an American College ofRheumatology conference in San Francisco.

In the mean time, the second part of the Phase II trialsinvolving 60 patients is ongoing and will be complete bythe end of this year. Results are expected in the firstquarter of 1996.

Engle said Phase III trials in the U.S. and Europe arescheduled to begin in the second half of next year.

Lupus, an autoimmune disease, results in a variety ofabnormalities. In addition to the prospect of kidneyfailure, patients suffer skin problems, central nervoussystem diseases and arthritis. Between 1.4 million and 2million people in the U.S. are stricken with lupus and 90percent are women. The most common current treatmentsare steroids and cytotoxic drugs, which can have seriousside effects.

Leo is a "good fit" for La Jolla's lupus drug, Engle said,because of the Danish company's established presence indrug markets for kidney disease and dermatologicaldisorders. n

-- Charles Craig

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