Organogenesis Inc. announced Tuesday that it has initiated onecollaboration and terminated another, both involving thedevelopment of key products.

One of those products, dense fibrillar collagen (DFC) fororthopedic implants, is now the subject of an agreementbetween Organogenesis and the medical device companyBiomet Inc. of Warsaw, Ind. The other, Graftartery for arterialreplacement, had been the focus of a five-year collaborationwith Eli Lilly and Co. -- a collaboration that suffered a setbackin November and has now ended.

Organogenesis of Canton, Mass., has been funding thepreclinical trials on its dense fibrillar collagen product for anumber of years; Biomet will now take up the funding of bothpreclinical and clinical development of DFC. As well,Organogenesis will receive a milestone payment once it files apremarketing approval application (PMA). It will alsomanufacture any products, to which Biomet will have exclusiveworldwide marketing rights.

The first preclinicals on DFC were conducted by collaboratorTufts University School of Veterinary Medicine starting inDecember 1991. These studies (in dogs) were designed to testDFC's strength, durability and healing characteristics for tendonrepair and tendon and ligament replacement.

Those results indicated that implanted collagen constructsprovided for guided tissue regeneration, resulting in theformation of new tissue that closely resembles normalligaments.

Organogenesis (ASE:ORG) began expanded preclinical feasibilitystudies of ligament replacement (in goats) at the MemorialMedical Center in Long Beach, Calif., in October 1992.Preliminary evaluations of the DFC device showed that it isnon-immunogenic and promotes normal healing andremodeling. Biomet will foot the bills for continuing studies.

But Organogenesis now has to take on the expenses ofdeveloping Graftartery, its small-diameter arterial replacementthat is manufactured from dense fibrillar collagen. Thedevelopment work had been funded since 1987 by Lilly undera collaborative agreement. By November 1992 Lilly had pouredabout $16.2 million into the project, but then withheld the nextmilestone payment of about $2 million because the twopatency data (for Graftartery)," explained Jennifer Pierce,director of corporate communications at Organogenesis.

"The goal was to demonstrate that Graftartery would stay openand withstand the flow of blood for six months (in rabbit anddog models)," Pierce told BioWorld. "We believe patency hasbeen met, but Lilly's interpretation is different. We couldn'tcome to terms."

So Organogenesis has reacquired all the technology associatedwith the collaboration and will fund the remaining $2 millionitself, while seeking another development partner.

Organogenesis has approximately $24 million in cash, no debt,and about 9.2 million shares outstanding, Pierce added. Itsstock closed at $7.25 a share on Tuesday, down $1.

-- Jennifer Van Brunt Senior Editor

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