Tokyo-based Chugai Pharmaceutical Co. Ltd. has formeda biotechnology drug development spin-off of its SanDiego-based diagnostics company, Gen-Probe Inc., with a$10 million initial investment.

The new company, Chugai Biopharmaceuticals Inc., isheadquartered in San Diego and run by Gen-Probepresident and CEO, Henry Nordhoff.

Chugai Biopharmaceuticals, Nordhoff said Wednesday,will focus on cancer, cardiovascular disease and viral andbacterial infections. Included in the company's work willbe research into identification of genes linked todisorders.

Chugai Biopharmaceuticals was launched this monthwith a drug candidate in Phase I clinical trials for AIDS.The product is an antisense compound directed atblocking replication of HIV by targeting messenger RNA.

Gen-Probe, acquired by Chugai in 1989, formed atherapeutic division two years ago with technology fromits genetic-based diagnostics, Nordhoff said.

With Gen-Probe's core business growing and with thedrug division moving products into clinical development,Nordhoff said Chugai decided to fund directly the drugresearch through creation of Chugai Biopharmaceuticals.

Osamu Nagayama, president of Chugai Pharmaceuticals,said the new company not only will search for drugcandidates, but also will commercialize products.

Chugai Biopharmaceuticals, Nagayama noted, willfunction as Chugai Pharmaceuticals' biotechnology drugdevelopment and sales headquarters in the U.S.

The parent company, Chugai Pharmaceuticals, alreadysells two biotechnology products outside the U.S.:erythropoietin (EPO), a red blood cell booster licensedfrom Genetics Institute, of Cambridge, Mass., andgranulocyte colony stimulating factor (GCSF), a whiteblood cell enhancer.

Nagayama noted the new San Diego subsidiary representsthe first aggressive effort by the Japanese pharmaceuticalfirm to establish a drug sales and development presencein the U.S. since the early 1990s.

In 1991, Chugai had allied itself with Upjohn Co., ofKalamazoo, Mich., to market Genetics Institutes' EPO inthe U.S. The collaboration was scuttled after a federalcourt barred the sale of the drug, saying it infringed theEPO patents of Amgen Inc., of Thousand Oaks, Calif.Amgen and Chugai also clashed over GCSF, but resolvedtheir dispute.

Nagayama said Chugai Pharmaceuticals' move into theU.S. biotechnology market is part of a global strategy toexpand its new drug research beyond Japan. Thecompany's next target, he added, is Europe.

"The nature of research is very borderless," Nagayamaobserved. Companies go where the scientific expertise is,he said.

In addition, he noted, two other trends are combining topush pharmaceutical companies beyond their home bases.Governments throughout the world are moving to reign inhealth care costs, Nagayama said, and countries'regulatory agencies are becoming more willing to shareclinical development data for review of new drugs.

Nordhoff said he expects Chugai Biopharmaceuticals,with 50 employees, to have annual operating expenses of$15 million to $20 million in the first several years.

Gen-Probe, in 1994, reported worldwide sales of $60million from its diagnostic products, which include testsfor sexually transmitted diseases, tuberculosis and fungalinfections. n

-- Charles Craig

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