Glycomed Inc. and Genentech Inc. have cut short their researchcollaboration in the development of drugs based on cell adhesioninhibitors because Genentech said it needs to focus on cash-generatingprojects.Nicholas Simon, Genentech's senior director and head of businessdevelopment, said the move to sever the relationship, which began in1991 and was extended last year through 1997, was based onGenentech's "need to focus its resources on projects that have theimmediate possibility of generating substantial revenues."David Stone, of Cowen & Co. in Boston, suggested that Genentech'sreasoning makes sense as opposed to any concern over theperformance of the potential drugs under development. He saidGenentech is facing a $60 per share buyout option in June 1995 bySwitzerland-based Roche Holding Ltd., which owns 65 percent of thecompany."If Roche doesn't exercise its option, Genentech should be in the midstof sharpening its focus and reducing expenses so that investors will paythe $50 or so for the stock," Stone said.Genentech spokeswoman Laura Leber said the relationship with Rochewas not involved in the decision. She said the company is continuallyreassessing its research efforts."For years, this is the way Genentech has been operating," she said."It's a process of reviewing the research and staying real tight and realfocused."News about ending the research agreement was released after themarket closed Thursday. Genentech's stock (NYSE:GNE) closed at$51.38 cents, unchanged. Glycomed (NASDQ:GLYC) was up 13 centsto close at $3.25.Stone said severing the collaboration could be good news for Alameda,Calif.-based Glycomed, which has been struggling."They're getting divorced, but they (Glycomed) get to keep the houseand the kids," Stone said. Genentech will make a $2.25 million cashpayment, which satisfies its research funding commitment to Glycomedthrough 1995. Also, Glycomed gets all rights to the cell adhesioninhibitor compounds under development. Genentech retains a 6.7percent equity position in Glycomed.During the past three years of their association, Genentech hascontributed about $20 million for the development of Glycomed's celladhesion inhibitors.Glycomed was working with Genentech on Celadin, a potential drugfor acute inflammation, and other compounds for treatment of acuteorgan failure and cancer. One of the goals was to file an investigationalnew drug application for one of the compounds by June 30, 1995.Glycomed also is conducting Phase II/III trials of a cell adhesioninhibitor, called Galardin MPI, for treatment of corneal ulcers.Glycomed spokeswoman Julie Wood said the company last monthsigned a three-year agreement with Japanese-based Sankyo Co. Ltd for$10.5 million. She said the company's current funding will be enoughto keep the cell adhesion projects in development as Glycomedsearches for other corporate partners.Brian Atwood, Glycomed's president and CEO, said he has talked withseveral potential prospects and has held a face-to-face meeting withone company."We are now in the process of contacting and meeting with a numberof potential development partners," Atwood said.Stone said the exit of Genentech, which had joint ownership ofpotential products, will make Glycomed a more attractive mergerpartner."Glycomed is down to a low market value and is a potential acquisitioncandidate," Stone observed. Genentech's stake and ownership inGlycomed's products were an encumbrance. This should make amerger easier."This spring, Glycomed underwent a restructuring after it discontinueddevelopment of Astenose, a drug candidate for restenosis. Thecompany reduced its workforce by 30 percent, slashing expenses bynearly half.Genentech has had some recent troubles if its own. In early August afederal grand jury indicted one of the company's top executives, aMinneapolis doctor and Caremark Inc., the sole U.S. distributor ofGenentech's Protropin, for an alleged $1.1 million kick-back scheme,which was uncovered during an ongoing nationwide investigation ofMedicare and Medicaid fraud. Later the same month, the FDA initiatedan investigation of Genentech for possible violations in promoting off-label use of Protropin. n
-- Charles Craig
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