The relationship between AutoImmune Inc. and itsdevelopment partner Schering-Plough Corp. has come to anabrupt end.

AutoImmune announced Wednesday that Schering has decidednot to exercise its option to develop and commercializeAutoImmune's product AI-200 for treating rheumatoidarthritis. Moreover, the two companies weren't able to reach anagreement on alternative terms for moving their collaborationforward.

Consequently, AutoImmune (NASDAQ:AIMM) of Lexington,Mass., will shoulder the responsibility of carrying the productthrough advanced clinical trials -- and perhaps into the market.

AutoImmune's approach is to develop pharmaceuticals basedon the principle of oral tolerance -- the body's ability tosuppress an immune reaction to foreign proteins absorbed inthe gut -- to deliver naturally occurring proteins (which couldbe of animal origin) to sites of autoimmune disease.

Schering's decision to end the collaboration was triggered bythe completion of Phase II clinical trials on AI-200. Per theterms of the agreement, inked in March 1992, at the clinicaltrial milestone, Schering was to either terminate thecollaboration or pay AutoImmune $10 million to continue.Schering had already paid AutoImmune $1.5 million --$500,000 up front and roughly $1 million for the cost of thePhase II trials, said Thomas Hennessey Jr., AutoImmune's vicepresident, chief financial officer and treasurer.

AutoImmune would not discuss the results of the Phase IItrials, which were double-blinded and randomized, becausethey have been submitted to and accepted for publication by a"leading scientific journal," said Hennessey. But the companydoes intend to continue with product development. "We areplanning for the next phase of the trials (Phase II dosing trials).Those trials will start in the next six to eight months and runfor about nine months to a year," Hennessey told BioWorld.

Due in large part to its January initial public offering, whichnetted close to $41 million, AutoImmune has the cash to seeAI-200 through the trials -- at least for now, said Hennessey.The company reported a reserve of cash and short-terminvestments of $34 million for the quarter ended June 30.

As for future partners in rheumatoid arthritis, since Scheringjust made its decision, "we haven't had a chance yet to decidewhether to seek a partner," Hennessey told BioWorld. "Wesuspect there will be companies interested in discussing thePhase II data."

Meanwhile, AutoImmune is already in discussions withpotential partners for its other products in the clinic, atreatment for uveitis (a disease of the retina) and a treatmentfor type I diabetes.

AutoImmune's stock gained 50 cents a share on Wednesday toclose at $6.75.

-- Jennifer Van Brunt Senior Editor

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