Ligand Pharmaceuticals Inc. entered into an agreement withSmithKline Beecham Corp. for development of orally administeredcompounds to control hematopoiesis, or blood cell production, basedon the former's technology involving signal transducers andactivators of transcription (STAT).

The deal could be worth up to $21.5 million for San Diego-basedLigand in research funding and equity investments. The agreementcalls for SmithKline Beecham, of Philadelphia, to make an up-front$5 million equity investment in Ligand. The remaining $16.5 millionwill be paid based on milestone achievements. Ligand also willreceive royalties on any products.

George Horner, vice president of commercial operations for LigandPharmaceuticals, said the initial $5 million equity investment willgive SmithKline "less than a 5 percent interest" in Ligand.

The agreement with SmithKline involving STATs is Ligand'ssecond partnership involving the technology. Ligand also has apotential $16 million collaboration with Abbott Laboratories Inc., ofAbbott Park, Ill., that includes using STAT technology to developinterferon alpha antagonists for anti-inflammatory drugs.

STATs are intracellular proteins responsible for signal transductionin the formation of a variety of cytokines and growth factors.

The SmithKline deal will target hematopoietic growth factors (HGF),which control blood cell production, and will focus on developingsmall molecule antagonists that mimic the activity of HGFs.

Initially the collaboration is expected to concentrate on developingoral forms of erythropoietin and colony stimulating factor, whichare involved in the production of red blood cells and white bloodcells, respectively.

Horner said Ligand has rights to develop three anti-cancercompounds on its own under the agreement.

Ligand's stock (NASDAQ:LGND) closed Monday at $8, an increaseof 50 cents. SmithKline (NYSE:SBE) was up 13 cents to $36.13. n

-- Charles Craig

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