Michelle SladeAssociate Editor

PhytoPharmaceuticals Inc. (Phyto), a subsidiary of EscageneticsCorp., announced Monday a major collaborative researchagreement in Brazil to discover plant-derived pharmaceuticalsusing Escagenetics' proprietory receptor screening technologiesand tissue culture processes.

The 10-year agreement between Phyto and Fundacao deEstudos Agrarios Luiz de Queiroz (FEALO), a private Brazilianresearch and educational foundation; Centro de BiotechnologiaAgricola (CEBTEC), a biotechnology research institute; and theUniversity of Sao Paulo gives Phyto exclusive access to CEBTEC'sinventory of plant extractions for drug development. Phyto alsoobtained exclusive worldwide rights to produce and marketdrugs from materials produced as a result of the agreement. Inreturn, CEBTEC will receive royalties on any products.

Phyto was formed last month as a 100 percent ownedsubsidiary of Escagenetics to pursue the development of plant-derived pharmaceutical products, particularly taxol,Escagenetics' anti-cancer drug.

The tremendous diversity of species and subspecies samplesfound in the Amazon basin that are being used under thecollaboration come from three main areas: the existingknowledge based on folklore medicine; knowledge based onsystemized, traditional herbal medicine; and the hundreds ofthousands of extracts that result from the collection of plantsamples.

According to Raymond J. Moshy, president and chief executiveof Escagenetics, the real potential of plant-derived drugs hasnot yet been achieved because of the enormous task involvedin collecting the vast numbers of plant samples and extracts.

Phyto will obtain thousands of plant extracts a year throughthis plant collective and extract program. The deal includes anextensive plant sample data base and tracking system atCEBTEC and the University of San Paulo -- essential for storinglarge samples of new plant extracts.

As each sample is logged into the sample data base, orherbarium, it can be put into a tissue culture or cloned forretrieval. If the active ingredient of, for example, a rare plantcannot easily be collected, this process can provide as much ofthe active ingredient as necessary.

Once collected, plant samples are screened using receptorbinding assays. When a disease indication is located, the largenumber of components present in a plant extract must beseparated to identify those that display therapeutic value.

These elements are further purified for subsequent screeningand other pharmacological studies. The screening processcontinues until all the compounds except those that showpromise are eliminated.

Once one of these "lead" compounds has been identified, thenext step is to increase the quantity of the compound forclinical testing.

Escagenetics will co-finance an additional research facility atCEBTEC and will support a technical program specifically tocollect plant samples.

Gary Davis, an analyst with Vantage Securities in New York,said the agreement is important to Escagenetics because itgives the San Carlos, Calif., company a consistent source ofspecimans to pursue its work in plant pharmacology.

"The Brazilian Amazon river basin has more species of plantsthan anywhere else in the world and an abundance of potentialdrugs that have never been developed. It's the largest open-airdrugstore in the world," said Davis.

Jim McCamant, editor of Medical Technology Stock Letter, saidthe agreement shows that Escagenetics has a real commitmentto look at the potential of this field.

"It's a hot area right now, particularly as a result of thebiodiversity treaty," said McCamant. "Even though there'snothing in the pipeline yet, Escagentics is planting seeds for thefuture."

Since the agreement doesn't yet involve a product, Davispredicted minimal short-term effects on the company'sfinancial activity. But he considers the agreement significantfor long-term investors. "As the company exploits and developsthis technology, over time it will represent much more value toshareholders," he said.

The company's stock (ASE:ESN) closed unchanged Monday at$7.38 a share.

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