Progenitor Inc., the gene therapy subsidiary of InterneuronPharmaceuticals Inc., signed an agreement worth up to $50 million toco-develop two of its blood stem cell growth factors withZymoGenetics Inc. for cancer patients.

The potential drugs are aimed at restoring bone marrow depleted bychemotherapy and radiation treatments, but may have applications forblood and immune system diseases.

The collaboration with ZymoGenetics, a subsidiary of Denmark-based Novo Nordisk A/S, is the second potential $50 million dealProgenitor, of Columbus, Ohio, has entered this year. The other wassigned in April with Chiron Corp., of Emeryville, Calif., for use ofProgenitor's nonviral vector technology in development of genetherapies for cancer, cardiovascular disorders and infectious diseases.

Interneuron's stock (NASDAQ:IPIC) closed Thursday at $8.06, up44 cents. Novo Nordisk was at $26.62, up 25 cents.

Financial details of the ZymoGenetics-Progenitor agreement were notdisclosed. But officials from both companies said research funds,license fees and milestone payments could total as much as $50million for Progenitor if the two research projects to develop thetargeted growth factors are successful.

In return for its investment, ZymoGenetics received rights tomanufacture and market any products derived from the two growthfactors. Progenitor also would receive royalties.

Mark Murray, vice president of business development for the Seattle-based ZymoGenetics, said the Progenitor molecules are still in theresearch stage. But he added they will bolster ZymoGenetics'position in the crowded field of companies targeting cytokinesinvolved in blood and immune system cell production.

Murray said ZymoGenetics expects to begin clinical trials this yearwith thrombopoietin (TPO) to boost platelet levels in cancer patientsundergoing chemotherapy.

In describing the deal with ZymoGenetics, Progenitor's president andCEO, Douglass Given, said, "Achievement of the initial milestones ofeach of the two growth factor projects could result in substantial feesand research support to Progenitor over the first six to 24 months ofthe agreement."

Both Progenitor growth factors are involved in early development ofhematopoietic stem cells. One product lead, Given said, is a cellulargrowth stimulating factor for boosting red blood cells.

"It has activity in early precursor cells and appears to be distinct fromother products, such as EPO (erythropoietin)," Given said. EPO is ared blood cell stimulator made by Amgen Inc., of Thousand Oaks,Calif.

Given described the other growth factor as a ligand that stimulates areceptor present on cells in the earliest stage of hematopoieticdevelopment. He said Progenitor has cloned the receptor.

Ralph Snodgrass, Progenitors vice president of research, said theproduct leads are the first two identified in the company's efforts tofind cellular growth factors involved in production and differentiationof precursor cells for the blood and immune systems.

Snodgrass said Progenitor retains all rights to any other product leadsit develops.

Progenitor is one of three subsidiaries of Interneuron, of Cambridge,Mass. The other two are Intercardia Inc., of Research Triangle Park,N.C., and Transcell Technologies Inc., of Princeton, N.J. n

-- Charles Craig

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