Corange Ltd. is investing up to $220 million in CellPro Inc.through separate equity, joint venture and licensingagreements, the two companies announced Monday.
Under the equity agreement, Corange will initially invest $50million in CellPro through the purchase of 1.16 million newlyissued shares of common stock at $43.09 per share. This willgive Corange about an 8 percent stake in CellPro on a fullydiluted basis.
Fifteen months after the initial purchase, Corange will buy $60million of additional CellPro shares at a price set at 155 percentof the average market price for the preceding 15 months,boosting Corange's stake in CellPro to 15 percent. Theagreement specifies that this price will not be less than $47.40or more than $60 per share. Corange has agreed not to increaseits ownership interest above 19.9 percent and has a right tomaintain its percentage ownership interest if CellPro issuesadditional shares.
CellPro (NASDAQ:CPRO) of Seattle currently has about 11.7million shares outstanding, about 13.3 million of them on afully diluted basis. The company's stock was up $2.50 onMonday, closing at $33.25 per share.
The two companies also signed a licensing agreement coveringdiagnostics and a joint venture agreement covering stem-celltherapeutic products. Corange research and developmentfunding for rights to these products could total as much as $55million, plus an additional $45 million in milestone payments.CellPro also will receive a signing fee of $10 million. Corange'sinvestment does not include future royalty payments.
Under the diagnostics agreement, Corange will acquireexclusive worldwide rights to diagnostic products usingCellPro's cell-selection technology and will pay CellPro royaltieson product sales.
The therapeutics agreement establishes a joint venture fordevelopment and marketing of stem-cell selection products fortherapeutic applications outside the U.S. and Canada. CellPromaintains North American marketing rights to the products.After expenses, Corange and CellPro will share the profitsequally.
At a news conference announcing the deal, CellPro's director ofinvestor relations, Lee Parker, said an executive committeeconsisting of equal representation from each company will beestablished to oversee the joint venture and licensingagreements. A separate steering committee will overseemarketing and development.
Parker noted that there are some provisions in the agreementfor cross-licensing new products to CellPro for marketing inNorth America. Mark McDade, chief operating officer ofCorange's Boehringer Mannheim-Therapeutics division, toldBioWorld that monoclonal antibodies being developed byCorange might be applicable for CellPro to market in the U.S.
This is Corange's second investment in a U.S. company. At theend of October it invested $75 million in Protein Design LabsInc., acquiring a 15 percent stake in PDL (see BioWorld, Nov. 1).For an additional sum, Corange also acquired exclusivemarketing rights to PDL's monoclonal antibodies outside NorthAmerica and Asia .
Parker said there is no connection between Corange'sagreement with PDL and its agreement with CellPro. However,he said that if an opportunity emerges to use PDL antibodies"in the setting that we are working, we would use them." Buthe added that the companies have no plans to link the tworesearch areas.
McDade said Corange targeted four areas for outsidecollaboration: monoclonal antibodies, stem cell separation, genetherapy and xenotransplantation therapy. Although McDadesaid Corange is looking globally for collaborators in theremaining two areas, he noted that the majority of companieswith this technology are in the U.S. Corange is a privatecompany based in Hamilton, Bermuda, with its head office inLondon.
The agreement with CellPro will expand Corange's own work inthe field of stem cell separation. McDade noted that Corangehas an internal program applying stem-cell separationtechnology to gene therapy. The research, being conductedthrough collaborations with European academic institutions, isat the preclinical stage.
CellPro is in Phase I/II clinicals with its Ceprate SC stem-cellconcentration system to concentrate stem cells from bonemarrow in gene therapy to treat cancer and genetic disorders.
Preliminary data from a Phase III trial of CellPro's Ceprate SCstem-cell concentration system for treatment of breast cancerwere reported Saturday at the annual meeting of the AmericanSociety of Hematology in St. Louis. The Ceprate systemconcentrates and purifies stem cells; in the breast cancer trials,stem cells are derived from bone marrow in autologous bonemarrow transplantation.
The study of 98 patients compared engraftment (patientsreaching 500 neutrophils per mm3 by day 20 after transplant)in patients receiving CD34+ cells purified with the Cepratesystem against conventional autologous bone marrowtransplantation. Another primary end point was reduction incardiovascular side effects caused by marrow infusion. Patientsin both groups received Amgen Inc.'s Neupogen aftertransplantation.
CellPro reported that 91 percent of the patients in the testgroup showed engraftment by day 20 after the transplant,compared with 88 percent of the patients receivingconventional BMT. In addition, the company cited a statisticallysignificant reduction in cardiovascular side effects in the CD34+transplant group. No significant differences between the twogroups were seen in infection, bleeding, days of hospitalization,patient survival and number of transfused packed red bloodcell and platelet units.
Parker said CellPro expects to file a premarket approvalapplication for the Ceprate system with FDA this month and tomove quickly to file for regulatory approval in Japan. Corangehas a fully integrated business in Japan and hopes to expediteCellPro's efforts there.
Although North America is not currently covered in CellPro'smarketing agreement with Corange. Parker added that thelong-term arrangement "is an open question." Penetrating thearea of high-dose chemotherapy "is going to take a largermarketing force than we have," he said.
-- Brenda Sandburg News Editor
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