WEST CHESTER, Pa. -- Cephalon Inc. strengthened its ties withKyowa Hakko Kogyo Co. Ltd., announcing Tuesday an exclusivelicensing agreement to develop small neurotrophic moleculesfor treating head and spinal injuries and otherneurodegenerative disorders.

The target molecules are derived from a compound known asK252a, which was discovered as a protein kinase inhibitorusing Kyowa's proprietary technology. Cephalon has beenevaluating the molecules for treating neurodegenerativediseases under an agreement reached last year that also gave itan option to license the molecules.

"There was enough biological activity (found) that they felt themost prudent thing was to take them all," said Jacqueline G.Siegel, an analyst with Hambrecht & Quist Inc. in New York.

The molecules and their analogs have been shown in animalstudies to enhance and modulate the activity of neurotrophins,which promote the survival of neurons following head or spinalinjury. With an estimated 500,000 cases each year of head andspinal injury in the U.S., the products' potential market exceeds$500,000, the company said. Such products would likely haveapplications in treating other neurodegenerative diseases.

Small enough to pass unassisted through the body's blood-brain barrier, the target molecules could be administered topatients by routine injection or oral administration rather thanthrough an invasive procedure, Cephalon said. By activatingneurotrophins on their specific tyrosine kinase receptors, themolecules' action is analogous to how Valium increases activityof neurotransmitters in the brain.

"They've been able to tap into a family of molecules that havepatent protection" and on which some safety andpharmacological data has been collected by Kyowa, David K.Stone, an analyst with Cowen & Co. in Boston, said of Cephalon."Access to all these things in an area where you haveinteresting biological activity is significant."

The companies offered no product development timetable.However, given the complexity of developing neuraltherapeutics, commercial products aren't likely until the secondhalf of the decade, Siegel said. Still, the agreement "is very goodfor both of them. Cephalon has been making steady progressthat's not been reflected in its stock price."

Cephalon (NASDAQ:CEPH), which went public last year at $18 ashare, closed Tuesday at $9.75 a share, up 50 cents.

The Kyowa-Cephalon agreement reflects an evolvingrelationship between two companies that each discovered theother's approaching neurotrophic molecules from differentresearch tacts and now appear ready share the benefits ofworking together.

The companies noted their respective contributions Tuesday.The Kyowa connection "significantly enhances Cephalon'sefforts by providing us with access to a promising family ofsmall neurotrophic molecules at an advanced state ofdevelopment," said Frank Baldino Jr., the company's presidentand chief executive officer. Cephalon is working separately ontreatments for other diseases, including Alzheimer's, stroke andamyotrophic lateral sclerosis (ALS).

The two companies' efforts "are very complementary, and thiscollaboration will strengthen the presence of both companies inthe neuroscience field," said Takashi Nara, Kyowa's seniormanaging director. Tokyo-based Kyowa has $2.6 billion a yearin sales of pharmaceuticals, chemicals and foods.

Among the partners' short-term objectives is to narrow thefield of potential molecules, which now comprises about 100analogs, to a few lead compounds that would be moved towardclinical trials.

"No one ever said the neural area was going to be easy," saidSiegel. In neural biotechnology, "the foundations of science andcommercial development are close together," she said.

Companies working on related products include Alkermes Inc.,Regeneron Pharmaceuticals Inc. and Athena Neurosciences Inc.

-- Ray Potter Senior Editor

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