Genentech Inc. on Monday announced a $20 million researchagreement and equity investment in Xenova Ltd., the largestsuch agreement Genentech has reached with another biotechcompany.

The five-year agreement, which extends joint work alreadybeing done by the two companies, includes $10 million inresearch support and a $10 million equity investment inprivately held Xenova. Half of the equity investment was madeon Monday and the other half will be made within the next twoyears against a project milestone, said Louis Nisbet, chiefexecutive officer of Xenova.

The agreement is also the first of its kind for a Britishcompany, Nisbet told BioWorld.

"I think that collaborations within the industry will becomemore and more the norm," said G. Kirk Raab, president and chiefexecutive officer of Genentech. In an interview, Raab saidcompanies such as Genentech now have the resources to formsuch collaborations.

"Both sides are seeing there will be significant scientificsynergies from these collaborations, which have not been thecase with collaborations between biotech companies andpharmaceutical companies," he said. In addition, companiessuch as Genentech bring expertise in manufacturing proteinsand in moving biotech products through the regulatory process,he said.

Such agreements also provide access to new technologies."This is an opportunity for (Genentech) to get a new wave ofsmall-molecule drugs," said Nisbet.

Genentech initiated a strategy of obtaining technology incollaboration with development-stage companies in January,when it signed a $15 million agreement with Glycomed Inc. InSeptember, Genentech signed a $14 million agreement withIncyte Pharmaceuticals Inc. The company also has establisheda major research collaboration with Telios PharmaceuticalsInc.

The Genentech-Xenova agreement, which was initiated in 1989,covers development of small molecules to treat hypertensionand heart disease, focusing on receptors important inhypertension, congestive heart disease and a molecularmechanism involved in atherosclerosis. Other new targetsinclude adhesion molecules believed to play a role ininflammation and autoimmune diseases.

The collaboration combines Genentech's expertise inrecombinant DNA technology and protein chemistry withXenova's ability to screen small molecules derived frommicrobes.

The companies will jointly develop drug leads and conductclinical trials. Genentech will have exclusive North Americanmarketing rights, and the companies will share rightselsewhere in the world.

Stock of Genentech (NYSE:GNE), based in South San Francisco,Calif., closed up 50 cents Monday at $28.38.

Xenova, based in Slough, is independently developing smallmolecule regulators of T cells for rheumatoid arthritis,inhibitors of growth factors to treat cancer, collagenaseinhibitors and a plasminogen activator inhibitor.

Xenova also has agreements with Hoffmann-La Roche, targetingautoimmune diseases and organ transplant rejection; withMonsanto Co. to develop fungicides; and with FMC to developinsecticides.

-- Karen Bernstein BioWorld Staff

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