Allelix Biopharmaceuticals Inc. is collaborating with units ofHoechst AG on the discovery and development of drugs to treatschizophrenia and other psychiatric disorders. The deal potentially isworth Canadian $53 million (U.S. $37.6 million) to Allelix.

The five-year research program will focus on the dopamine andserotonin receptors.

As part of the package, Hoechst-Roussel Pharmaceuticals Inc., ofSomerville, N.J., purchased Canadian $9.8 million (U.S. $7 million)in Allelix equity at a price of Canadian $8 per share, a premium ofabout 15 percent to the market. The purchase of about 1.225 millionshares gives Hoechst-Roussel nearly 11 percent of Allelix's 11.2million outstanding shares.

Allelix, over five years, also could receive research funding andmilestone payments of Canadian $43 million (U.S. $30.5 million)from Hoechst-Roussel Canada Inc., of Montreal. Hoechst-RousselCanada gets rights to develop, manufacture and market productsresulting from the collaborative research, and would pay royalties toAllelix, of Toronto.

Douglas Froom, Allelix's vice president, business development, toldBioWorld the Canadian $43 million is split roughly in half betweenresearch support and milestone payments. He said the research willbe fully funded and that the milestones likely will be triggered overthe collaboration's five-year term.

"It's a very exciting time for Allelix," Froom said. "This extends ourcash position, probably supporting research beyond four years. Wefind ourselves in an ideal position to weather this period of[financing difficulty]. We have [Canadian] $35 million in the bankand significant corporate collaborations that provide not only aresearch offset, but a profit."

Earlier this month, Allelix signed a Canadian $15 million basicresearch agreement with Eli Lilly Canada Inc., which will entail fouryears of funding in diseases of the central nervous system. Thatextended a previous deal. Last year Allelix and Paris-based GroupeFournier entered into a research agreement in the area ofatherosclerosis, and the company is working with W.R. Grace & develop products based on Grace's thrombospondin technology.

The Lilly deal, in which the targets were not disclosed, involvesreceptor cloning, Froom said. The Hoechst-Roussel alliance isgeared toward developing drugs for schizophrenia.

"We're taking receptors and putting them in biological assays, andusing those assays to isolate drugs to treat schizophrenia," Froomsaid. "We have the assays and both of us have the compounds.

"We had been seeking partners," he said. "The alliance with Hoechstemanated from an internal strategy at Hoechst. As a result, thealliance was put together in a relatively short time."

Andrea Stine, a Hoechst spokeswoman, told BioWorld that theequity investment came about because Hoechst-RousselPharmaceuticals "is impressed with Allelix's broad-based researchprogram, and is interested in supporting it." Hoechst-Roussel Canadabelieves Allelix's work in the neuroscience area will complement itsown, she said.

Additional terms of the deal include Allelix having co-promotionrights in Canada and certain northern European countries. AndAllelix has a right of first refusal on co-promotion in the U.S.

Separately, in the central nervous system area, Hoechst-RousselPharmaceuticals has a collaboration with Oncogene Science Inc., ofUniondale, N.Y., to develop gene-transcription based drugs forAlzheimer's disease.

Allelix has two compounds in the clinic. The company receivedapproval from Canadian officials in November to begin a Phase I/IItrial of its transcription targeted drug, ALX40-4C, in HIV patients. Italso has ongoing early stage trials of ALX1-11, a recombinanthuman parathyroid hormone, for osteoporosis, which formerly wasbeing developed with Glaxo Canada Inc. n

-- Jim Shrine

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