Baxter Diagnostics Inc., a subsidiary of Baxter International, hassigned a letter of intent to form a cardiac diagnostic researchand marketing alliance with Spectral Diagnostics Inc. involvingan equity investment of up to 15 percent and worth some $17million.

Baxter (NYSE:BAX) will provide distribution and marketingexpertise and receive exclusive rights in North America andSouth America to one of Spectral's cardiac panel tests. Baxterwill also receive the exclusive right of first offer fordistribution rights for Europe and the United Kingdom asproducts become available.

Baxter will have exclusive right of first offer for all diagnosticproducts developed by Spectral other than under specificdevelopment agreements.

In addition to the distribution agreement, Baxter may acquireup to 15 percent of the outstanding common shares of Spectralon a fully diluted basis. On closing, Baxter will pay an initial $1million to obtain shares and will acquire warrants to purchaseadditional common shares. Spectral can require a $3.2 millioninvestment when certain milestones are accomplished.

Spectral (NASDAQ:DIAGF) of Toronto is developing panel testswith one or more of the cardiac markers myoglobin, CK-MB,myosin light chain, CK-MB and troponin-I. The tests, slightlylarger than a credit card, provide a diagnosis in about eightminutes. The company believes the tests can distinguish non-heart ailments from heart conditions and unstable angina fromheart attack.

The tests are in clinical trials at two Canadian hospitals and willenter beta-site clinical trials in five U.S. hospitals later thisyear. -- Nancy Garcia

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