Hemosol Inc. has entered into an agreement with Germany-basedFresenius AG that could be worth as much as $27.5 million(Canadian $39 million) to the Toronto company for development andsale of its red blood cell substitute, Hemolink.

Ian Bain, Hemosol's chief financial officer, said the deal would giveFresenius manufacturing and marketing rights to Hemolinkthroughout Europe, except the Netherlands. Fresenius also wouldconduct clinical development in Europe.

Hemosol, which has filed an investigational new drug application tobegin Phase I clinical trials in Canada with Hemolink, would retainrights to the blood substitute product outside Europe.

Under terms of the collaboration, Fresenius, a health care companywith more than $1 billion in annual sales, will pay Hemosol $2.45million (Canadian $3.5 million) in license fees and purchase 1million preference shares of Hemosol stock for $3.92 million(Canadian $5.6 million) when the agreement is finalized.

Fresenius also has agreed to pay $10.43 million (Canadian $14.9million) upon achievement of various clinical developmentmilestones. Those payments would include $6.65 million (Canadian$9.5 million) in cash and $3.78 million (Canadian $5.4 million) toconvert the 1 million preference shares to an equal number ofHemosol common shares.

The conversion of the shares would be based not only on milestoneachievements, but also on appreciation of Hemosol's stock(TSE:HML).

In addition, Fresenius has agreed to buy another 1 million shares ofHemosol at a per share price of $10.50 (Canadian $15). That stocksale also would be based on Hemolink's clinical developmentprogress.

Bain said Hemosol currently has 11 million shares outstanding (12million shares fully diluted). The tentative agreement with Freseniuswas reached Jan. 16 when Hemosol's stock was trading at $4.84 pershare, giving Hemosol a 15 percent premium on the sale of thepreference shares.

Hemolink is a human hemoglobin-based synthetic blood substitute.Unlike blood, Hemolink can be stored for long periods and isuniversally compatible with all blood types.

Among Hemosol's major competitors in development of red bloodcell substitutes are Somatogen Inc., of Boulder, Colo., BaxterInternational Inc., of Deerfield, Ill., and Northfield Laboratories Inc.,of Evanston, Ill. n

-- Charles Craig

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