Cephalon Inc. and TAP Pharmaceuticals Inc. said Tuesday they enteredinto an agreement to develop and commercialize Cephalon compoundsfor the treatment of prostate cancer. The collaboration brings $17million immediately to Cephalon, and is potentially worth more than$50 million to the West Chester, Pa., company.TAP bought $14.4 million of Cephalon stock, and paid the firstinstallment of a $5 million 1994 research and development payment.The agreement also includes additional research payments to bedetermined annually, license fees, milestone payments and royalties onproduct sales."This is a pivotal time in the company's history," Frank Baldino Jr.,Cephalon's president and CEO, told BioWorld, "because this is the firsttime that we're venturing beyond neurology. All of our core programshave applications outside neurology, and we would look to exploit eachone of them" with outlicensing agreements.TAP, of Deerfield, Ill., is the joint venture between AbbottLaboratories, of Abbott Park, Ill. and Takeda Chemical Industries Ltd.of Japan. It markets Lupron Depot 7.5 mg, the leading drug in the U.S.for the treatment of advanced prostate cancer, with sales of $550million per year, Baldino said.The compounds involved in the collaboration are from a family ofinhibitors from Cephalon's receptor tyrosine kinase program, whichwere derived from a class of compounds licensed from Kyowa HakkoKogyo Co. Ltd. of Japan. The molecules, in animal studies, preventedgrowth of prostatic cells and the growth of human prostate cancer cellstransplanted to host animals.The prostate growth inhibitors act on androgen-independent cells.When a growth factor binds its prostate cell receptor, tyrosine kinase_ the signaling system of specific cell-surface receptors _ signals thecell to multiply or survive.Edmund Debler, an analyst with Mehta and Islay of New York, toldBioWorld the collaboration was substantial for Cephalon, particularlyin light of the money involved and the early stage of the program. "It's a good deal," Debler said. "It really shows the strength of thebroad-based technology program Cephalon has. They were able to getsome inhibitors of this receptor complex, and apply it to oncology."Cephalon Leverages Its TechnologyHe said he wouldn't consider the outlicensing a new strategy byCephalon; just a leveraging of the technology it has, which he expectsto continue while the company remains committed to the area ofneurology.Under the agreement, Cephalon will continue research and preclinicaldevelopment supporting preparation of an investigational new drug(IND) application for prostate cancer and/or benign prostatichyperplasia. Cephalon also will obtain the necessary supply of clinicaltrial and commercial drug product, while retaining rights to thecompounds outside the U.S. TAP will conduct all post-IND researchand development activities, and will sell any approved products in theU.S.TAP president Yasu Hasegawa said, "TAP is committed to finding newand better compounds for the treatment and management of prostatedisease. We are pleased with this agreement not only because we thinkit will help us meet that commitment, but also because it strengthensour long-term position in our most critical market."Cephalon now has about $125 million in cash, and, with the researchand development installment, revenues this year of $22 million fromcorporate partners. Baldino said the company didn't necessarily makethis deal for the money.`We've done a lot of deals and they're all strategically focused," hesaid. "We've got very deep technology, and these are the dividends ofthose programs. With these corporate alliances, we've diversified therisk substantially."In June 1993, Cephalon entered into a five-year collaboration withSmithKline Beecham to develop calpain inhibitors for the treatment ofstroke and other neurological disorders. It provides for researchpayments of up to $25 million to Cephalon. And in 1990 Cephalonentered into a $20 million, five-year research collaboration withSchering-Plough Corp. to develop products for Alzheimer's disease.The collaboration announcement was made after the market closed.Cephalon (NASDAQ:CEPH) stock was down 13 cents Tuesday,closing at $11.88.

-- Jim Shrine

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