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MICROGENESYS MOVING TWO VACCINES INTO CLINICALS IN EARLY 1989; SECOND AIDS PRODUCT IS BASED ON HIV-1 CORE PROTEIN, FIRM SAYS IN INITIAL PROSPECTUS

Executive Summary

MicroGeneSys will begin human testing of two additional vaccine products in early 1989, according to a registration statement covering the R&D firm's $ 35 mil. initial public offering. These include an AIDS vaccine, VaxSyn HIV-1 (p24), which is a follow-up to the product already in the clinic, VaxSyn HIV-1 (gp 160), and a malaria vaccine. While the original AIDS product is based on the precursor to the virus envelope protein, the new vaccine is based on the HIV-1 core protein. MicroGeneSys said it is also evaluating a combination product. Given the relatively long incubation period of the AIDS virus, the filing notes, the AIDS vaccines, like a rabies vaccine, may be appropriate as a post-exposure treatment. "The FDA has approved VaxSyn HIV-1 for clinical testing as a possible treatment to block or delay the onset of AIDS, and the company anticipates that Phase I human clinical trials will commence by early 1989," the prospectus states. The malaria vaccine, VaxSyn Pf-CSA, was developed in collaboration with the Walter Reed Army Institute and the National Institutes of Health (NIH). It employs a recombinant version of a complete surface antigen from the infectious stage of the parasite's life cycle. In August 1987, the vaccine R&D firm was thrust into the national spotlight when it became the first company with an AIDS vaccine approved for human testing. Only one other company, Bristol-Myers, has taken an AIDS vaccine into the clinic since then. Chrion (with Ciba-Geigy) and Repligen (with Merck) are reported to be close. Reporting on results with VaxSyn HIV-1 to date, MicroGeneSys said that 100 subjects are currently participating in the study, which is taking place at NIH under the auspices of the National Institute for Allergies & Infectious Diseases. "The vaccine has elicited immune responses in a majority of the trial participants, with no significant adverse reactions attributable to the vaccine," the prospectus states. The product contains no infectious portion of the HIV-1 virus, according to the company. The driving force behind the firm's product development strategy is the VaxSyn technology, which employs baculoviruses, a variety of insect virus that primarily infects butterflies and moths, and insect cell cultures to produce proteins that closely resemble the antigens of disease-causing microorganisms. MicroGeneSys has a non-exclusive, royalty-bearing license to a patent held by Texas A&M University pertaining to the use of recombinant baculoviruses. The company believes its technology offers advantages over the three most widely used expression systems -- bacteria and yeast, which yield proteins clinically identical but structurally different than those found in nature, and mammalian cells, which can synthesize proteins resembling the antigen but which produce smaller quantities that are subject to degradation during purification. In addition, MircoGeneSys said it is considering a licensing agreement with Cambridge BioScience. "The company has received an offer . . . to obtain a non-exclusive license to use certain inventions in the development, manufacturing and marketing of the company's AIDS products," the prospectus said. Cambridge BioScience is the exclusive licensee of a Harvard University patent covering the AIDS envelope protein. MicroGeneSys has also used its VaxSyn technology to develop two second-generation in vitro AIDS diagnostic products, MGScan HIV-1 ELISA and MGSearch HIV-1 Immunodot, for detection of HIV-1 antibodies. The products provide greater sensitivity and greater specificity than currently available AIDS diagnostics, according to the company. "The company is selling both of these products to domestic and foreign institutions for research purposes, and has recently commenced sales of MGSearch HIV-1 Immunodot to a marketing partner for commercial sale in Brazil," the filing states. "In addition, the company has developed MGStage HIV-I Skin Test, an in vivo diagnostic skin test which may be useful in assessing the stage of disease and prognosis of persons infected with AIDS virus." INDs have been submitted for all three diagnostic products. Other products under development include vaccines for Japanese encephalitis, dengue fever, hepatitis B, viral influenza, parainfluenza 3, respiratory syncytial virus and Lyme disease (see chart below). Incorporated in 1983, MicroGeneSys is headed by founder Frank Volvovitz, who serves as chairman and chief exec. Through Aug. 31, the company has generated $ 265,000 in revenues and fees from initial sales of AIDS diagnostic products. Total revenues for the nine months ended Aug. 31 were $ 900,923. The company's net loss for the period was $ 1.9 mil. The company said it is currently "evaluating various alternatives" for the worldwide marketing and distribution of its vaccine and therapeutic products under development. In the U.S., MicroGeneyss is looking both at co-marketing arrangements with larger drug firms and developing a small sales force. The firm recently hired a VP of diagnostic products to assist in the development and implementation of an appropriate marketing strategy. Chart omitted.

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