Osteotech Inc. announced Tuesday that it has agreed to end acollaboration with Alza Corp. that was developing a sustained-release formulation of drugs to aid muscle and bone surgeries.

Alza (AMEX:AZA) is granted all rights to any products andtechnical information arising from the collaboration, which hadstarted in 1987, while Osteotech (NASDAQ:OSTE) is relieved ofmaking any further payments to Alza.

Bonnie Burdett, spokeswoman for Palo Alto, Calif.-based Alza,said the termination "has no impact on our earnings -- it was avery small program."

Osteotech said the companies have agreed that certain billingsfrom Alza will not be paid, resulting in a $670,000 one-timepre-tax benefit to the Shrewsbury, N.J., company in the firstquarter of 1992. Osteotech is now developing its own drug-delivery technology for use in musculoskeletal medicine. Thecollaboration had been working on Alza's bioerodable polymeras a delivery system for anti-infectives, said Burdett.

Alza's polymer is mixed with a drug and will break down in thebody over time, releasing the drug. An anti-infective agentwould be released at a surgical site after the wound was closed.

Osteotech is a processor of human bone and connective tissuefor use in transplants, and is developing tissue-relatedbiomaterials.

Alza lost 25 cents to close at $46.88. Osteotech dropped 50cents to $16. -- RF

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