Genelabs Technologies Inc. said Thursday that it signed athree-year collaboration with SmithKline Beecham to completedevelopment of a hepatitis E vaccine.

The agreement calls for SmithKline to provide more than $12million in funding in the form of license payments, researchsupport, milestone payments and planned equity investmentsin Genelabs of Redwood City, Calif.

There is currently no approved vaccine against hepatitis E, awaterborne virus that is most prevalent in Asia and Africa. Itcauses an acute liver infection that can be debilitating andpotentially fatal, particularly for pregnant women. Initialstudies indicated that more than 2 percent of U.S. residents, orabout 4.8 million people, have been exposed to hepatitis E.

"We think we're much further advanced than anybody" indeveloping a vaccine, Peter Jansen, Genelabs' chief financialofficer, said Thursday. Genelabs has a prototype vaccine thathas shown success in animal studies against hepatitis E. Aninvestigational new drug (IND) application to start clinical trialsof the vaccine could be filed by late 1993, he said.

In June the company launched a diagnostic in several PacificRim detect hepatitis E. The test was developed in aresearch collaboration with Abbott Laboratories, which hasrights to the diagnostic for the U.S., European and Japanesemarkets.

Genelabs' collaboration with the federal Centers for DiseaseControl (CDC) isolated molecular clones of the hepatitis E virusin 1989. The U.S. government receives an undisclosed royaltyon any resulting vaccine and diagnostic products, Jansen said..

Under the SmithKline agreement announced Thursday,Genelabs is to receive royalty payments on SmithKline vaccinesales resulting from the collaboration. SmithKline receivedmarketing rights to a hepatitis E vaccine in the U.S., Europe andJapan. Genelabs has co-marketing and co-manufacturing rightsto the vaccine in parts of Asia, plus marketing rights to apotential combination vaccine against hepatitis E and hepatitisA

Both companies also agreed to collaborate on the developmentof a hepatitis C vaccine for which SmithKline received a limitedoption to license certain Genelabs' technology.

SmithKline agreed to purchase 219,178 newly issued shares ofGenelabs stock, or slightly more than 1 percent of the company,at $9.13 a share and to make a $2 million interest-free loanthat is convertible within two years into Genelabs stock at theexisting market price. Including the SmithKline stock purchase,Genelabs has 18.1 million shares outstanding.

Genelab's stock (NASDAQ:GNLB) closed Thursday at $5.88, up63 cents.

The collaboration could expand SmithKline's already largeposition in hepatitis vaccines. Its flagship vaccine product,Engerix-B against hepatitis B, was developed with Biogen Inc.and is the world's top seller. Earlier this year it introducedHavrix, the world's first approved vaccine against hepatitis A.

Genelabs has developed several leads, but has identified nofinal candidate for its own vaccine against hepatitis C, Jansensaid.

Two proprietary Genelabs technologies, SISPA (sequence-independent, single-primer amplification) and hepatocyteculturing and screening, are part of the company's hepatitisresearch strategy and the SmithKline collaboration.

SISPA allows researchers to produce copies of unknown genesand viral genomes found in trace amounts in biological samplesand played a role in cloning genomes of the hepatitis virus.

Genelabs obtained exclusive rights to hepatocyte culturetechnology through its 1991 acquisition of BTR, a Texas-basedbiotechnology company. It enables researchers to infect livercells in vitro with hepatitis viruses. The company claims thisprovides a powerful and low-cost method for in vitro screeningand testing of anti-hepatitis drugs and antibodies.

Genelabs has filed U.S. patent applications on its hepatitisvaccine and related discoveries, including molecular clones andsequences, Jansen said. It has been issued one patent in Taiwanto the underlying vaccine technology.

-- Ray Potter Senior Editor

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