Pharmaceutical heavyweight Rhone-Poulenc Rorer invested inthe future on Thursday when it agreed to purchase 37 percentof Applied Immune Sciences Inc. (AIS) for $113 million.
"Molecular biology and genetic engineering will lead to majorchanges in how diseases are treated," Robert Cawthorn, Rhone-Poulenc Rorer's chairman and chief executive officer, said aboutthe investment in the small cell therapy company. "There'sgoing to be a revolutionary change in patient treatment that insome cases may obviate the need for pharmaceuticals."
Rhone-Poulenc Rorer (NYSE:RPR) has an option to boost itsstake in the Santa Clara, Calif., company (NASDAQ:AISX) to 60percent by June 30, 1997.
AIS's stock gained $3.88 a share on Thursday, closing at $22.88,as 1.2 million shares changed hands -- 10 times the previousday's volume.
AIS was founded in 1985 by Thomas Okarma, a StanfordUniversity immunologist specializing in autoimmune diseases.The company is perfecting extraction, activation and reinjectionof immune system cells into patients to treat conditions rangingfrom cancer to AIDS. The company has entered clinical trials ingraft vs. host disease, cancer of the ovary, breast and kidney,and AIDS.
Last year the company built its first cell therapy center withhome-infusion specialist Caremark Inc. in South San Francisco,Calif., where a Phase II trial in AIDS patients is ongoing. Rhone-Poulenc Rorer has agreed to spend about $30 million to financenine centers around the world and conduct clinical trials overthe next three to five years. The new partners are also startinga 50-50 joint venture to market and distribute cell therapyproducts and services.
Okarma likened the centers to "hospitals for cells," in whichtechnicians treat and incubate patients' cells. He said thesecenters should provide economy of scale and cost containment.
Okarma added that although AIS plans to open centers withpartners in Switzerland and Israel, a broad deal like the oneannounced Thursday is not planned in the near term.He said the relationship with Rhone developed "spontaneously"because the companies have similar visions of the wayexperimental gene therapy will eventually change patienttreatment. In the agreement, subject to AIS shareholderapproval, the companies are consolidating proprietarytechnologies.
AIS made an equity investment in January in GenetixPharmaceuticals Inc., an early-stage New York companyfocused on conferring multiple drug resistance to cancerpatients' stem cells. AIS received a license for a gene designedto protect progenitors of infection-fighting immune cells fromdestruction by chemotherapy.That same month AIS received a patent for speedingproduction of the extra-safe adeno-associated virus for use ingene therapy.
Meanwhile, Rhone-Poulenc Rorer of Fort Washington, Pa.,recently signed an agreement with the French ScientificResearch National Center and the oncology Institut GustaveRoussy to acquire, together with Pasteur-Merieux-Connate andTransgene, the rights to use an adenovirus that can also carrytherapeutic genes into many cells.
Analyst Andre Garnet of Southcoast Capital Corp. of NewOrleans told BioWorld that AIS declined cell separationlicensing offers from three companies working on alternatestem cell selection methods.
AIS's CELLector preferential cell separation system usesmonoclonal antibodies permanently bound to an inertmembrane, Garnet said, and should become "an enablingtechnology for all kinds of conditions."AIS, he said, has "added value" with patents surroundingincubation and expansion of cells, with applications in AIDS andcancer. Potential long-term disease targets include hemophilia,amyotrophic lateral sclerosis and senile dementia.
Okarma said the system runs no risk of sensitizing patients toforeign antibodies or antibody complexes containing their owncells. The process can also remove cancer cells in an initialfiltering step using soybean agglutinin.
He said he expects the CELLector system to be approved byearly 1994 because it is regulated as a device instead of a drug.
"Most analysts turned up their noses at the company because itmakes a device," Garnet said. "They're fixated on companiesmaking drugs," he said. "The company downplayed it, but Ithink they have solved the problem of AIDS."
The AIDS treatment involves activating dormant killer T cellsoutside the body with interleukin 2, which is too toxic fordirect administration of effective doses. Ideally, the T cells canbe sensitized so they can be switched on by naturally occurringIL-2 levels in the body, Okarma said."We can push infection to a standstill," he said, comparing it totreating chronic tuberculosis infection. "We can't eradicate HIVthat incorporates into the (cellular) DNA, but we think we cankeep it there."
Garnet expects the treatment to cost $5,000 and be available assoon as 1994. He projects that AIS will break even by 1995,net $30 million (or $2.60 a share) by 1996, and have $175million in U.S. sales by 1997, when Rhone-Poulenc Rorer'soption to buy more shares expires. European approvals couldenrich that revenue stream.
Last year AIS had $445,000 in sales of cell selectors that itmanufactures for research use. With an annual burn rate of$20 million, the company is expected to show a loss per shareof $2.40 in 1993.
Rhone's Cawthorn said there will be a restructured R&Dwriteoff but little bottom-line impact from the AIS investment.
Rhone-Poulenc Rorer has already committed about $150million over five years to biotechnology alliances in France,said Manfred Karobath, president of research and development."Our goal is to acquire all proprietary technology to dowhatever is necessary to become a key player in this field,"Karobath said.
-- Nancy Garcia Associate Editor
(c) 1997 American Health Consultants. All rights reserved.