Michelle SladeAssociate Editor

NeXagen Inc. said Monday it has entered into a three-yearcollaborative agreement with Eli Lilly & Co. to develop drugsdirected against two unnamed molecular targets occurring incertain cardiovascular and inflammatory disorders.

Under the agreement, Lilly made a $3 million equityinvestment for a minority position in NeXagen and provided anundisclosed sum for research. NeXagen of Boulder, Colo., willreceive royalties on product sales resulting from thecollaboration, as well as milestone payments.

According to Patrick Mahaffy, NeXagen's president and chiefexecutive officer, the agreement is the company's first majorcollaboration since its inception last year. To date, thecompany has been funded solely by E.C. Warburg, Pincus and Co.,a New York-based venture capital firm.

The collaboration will use NeXagen's proprietary SELEX(systematic evolution of ligands by exponential enrichment)chemistry technology to make high-affinity nucleic acidligands that target small peptides, molecules and proteinsagainst disease targets.

SELEX can rapidly isolate a unique nucleic acid sequence thatbinds most tightly to a specific target from as many as 1,018possible ligands. The isolated ligands are then chemicallymodified for the development of therapeutics.

David Webber, an analyst with Alex. Brown & Sons in New Yorksaid SELEX has tremendous potential. "From what I've seen, itlooks to be an extremely flexible technology which, if itworks, will be able to rapidly develop the optimal molecule forpretty much any molecular target," he said.

"SELEX is a powerful tool that demonstrates nucleic acids canbe considered useful as therapeutics in ways that, prior to thedevelopment of SELEX, were not considered possible," Mahaffysaid.

He said that although the company doesn't have any plans forfurther collaborations, he thinks small companies must besomewhat opportunistic. "It's possible that we may add moremolecular target specific deals as we go along," Mahaffy said.

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