Cytel Corp. and Sumitomo Pharmaceuticals Co. Ltd. have signeda five-year technology development agreement worth up to $45million to develop drugs based on Cytel's LEC-CAM celladhesion technology.

In a separate announcement on Thursday, Cytel said it has filedfor an initial public offering of 3 million shares of stockpriced between $12 and $14 per share.

The deal with Sumitomo covers leukocyte endothelial celladhesion molecules to treat acute inflammatory diseases andcancer. LEC-CAMs are one of three families of CAMs beingdeveloped by Cytel.

CAMs are found on the surface of endothelial cells and whiteblood cells. They are responsible for the recruitment andmigration of white blood cells to sites of tissue injury. CAMsare also thought to be implicated in cancer metasteses, saidJeryl Hilleman, vice president of operations and finance atCytel.

The companies will work on two compounds that are inpreclinical development: CY 1787 to treat septic shock and CY1503 for adult respiratory distress syndrome. They will alsocollaborate to develop compounds to treat reperfusion injuryand cancer. That work is in the discovery phase.

Sumitomo, which will provide $15 million in research fundingto the San Diego company, has been granted an option tolicense products emerging from the collaboration for PacificRim markets.

If Sumitomo exercises a product option, it will also pay Cytelan option fee, make milestone payments and pay royalties onproduct sales. Total option fees and milestone payments willnot exceed $25 million.

Sumitomo also agreed to make a $5 million equity investmentin Cytel at Cytel's discretion between Jan. 1, 1992, and April30, 1994.

Cytel retains the right to manufacture products for Sumitomoand all rights to products resulting from the collaboration inmarkets outside the Pacific Rim. Cytel has a royalty-freelicense covering any technology arising from the collaborationwithin the field either jointly owned or owned solely bySumitomo in markets outside the Pacific Rim.

Cytel is working on two other families of CAMS: integrins,which are implicated in chronic inflammation and autoimmunediseases, and monocyte adhesion molecules, which areimplicated in atherosclerosis. Integrin compounds inpreclinical development are CY 725 for asthma and CY 726 forskin inflammation. Work on autoimmune diseases andatherosclerosis is in the discovery phase.

The company also has an antigen-recognition program, whichfocuses on the major histocompatibility complex. Cytel in1989 signed a $30 million deal with Sandoz AG to developcompounds to treat rheumatoid arthritis, Type I diabetes,multiple sclerosis and organ rejection. Cytel is working on itsown on compounds for celiac disease (allergy to gluten) andhepatitis B.

Cytel has raised $7 million in venture funding from BovestPartners, Hillman Ventures, Morganthaler Ventures, Sutter HillVentures and J. H. Whitney & Co. If the IPO is completed, thecompany will have 11.9 million shares outstanding.Underwriters Goldman, Sachs & Co. and Alex. Brown & Sonshave a 450,000-share overallotment option.

-- Karen Bernstein BioWorld Staff

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