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BOEHRINGER-INGELHEIM OFFERING TO BUY 5% STAKE IN ALLIANCE

Executive Summary

BOEHRINGER-INGELHEIM OFFERING TO BUY 5% STAKE IN ALLIANCE pharmaceutical as part of a preliminary agreement that would give the West German company non-U.S. marketing rights to a series of perfluorooctylbromide (PFOB) contrast imaging and blood substitute products. Under the agreement, announced Feb. 28, Boehringer-Ingelheim would pay "above the current market price" for an equity stake of "approximately 5% on a fully-diluted basis." Alliance, formerly known as Otisville BioPharm, has been trading at about 9-1/4. That indicates a baseline price for the deal above $ 6 mil. The agreement calls for additional payments by Boehringer-Ingelheim to Alliance at certain regulatory milestones. Boehringer-Ingelheim is also set to assume share in the funding of ongoing research by Alliance. Boehringer-Ingelheim will pay for "certain clinical trials." Alliance will "retain responsibility for preclinical work and clinical trials" for products not covered under the agreement. The PFOB products included in the preliminary agreement, or letter of intent, are three contrast imaging agents and a temporary blood substitute. The contrast agent furthest along the pipeline is a Phase III oral formulation indicated for gastrointestinal imaging with X-rays or magnetic resonance. Alliance projects that the Phase III trial will be concluded in six months and expects the drug to be marketed "as early as" the end of 1990. A second contrast agent, for liver cancer, covered by the agreement is an I.V. product, currently in Phase II in Europe. The product is used with computed tomography (CT) or ultrasound imaging. The third imaging agent, in pre-clinical trials, is a percutaneous lymphographic agent that detects abnormalities in the lymphatic system with CT. The temporary blood substitute, or perioperative hemodilutive, maintains a patient's normal oxygenation state during surgical procedures. The surgical oxygen-delivering indication is being tested in pre-clinicals. Also provided in the letter of intent is the option for Boehringer to separately negotiate worldwide rights for the use of PFOB as an adjunct to percutaneous transluminal coronary angioplasty (PTCA) procedures. The product is intended to provide oxygen to the heart muscle while the balloon is occluding the artery during PTCA. The PTCA adjunct is now in pre-clinicals, and the company expects to market the product by mid-1992. If Boehringer agrees to expand its business to include the PFOB products within the 90 days stipulated by the letter of intent, the company will gain the right of refusal to all future applications of the basic PFOB compound. Two applications currently being tested in pre-clinicals involve the treatment of myocardial infarction and a radiation therapy adjunct. Alliance forecasts that both indications could reach the market before the end of 1993. Boehringer has recently agreed to co-promote Genetech's Activase outside the U.S. PFOB is an inert oxygen-carrying molecule that is not metabolized by the body. The compound is used in its "neat," oil-like form only for the oral contrast gastrointestinal application. All other indications require that PFOB be emulsified with water and surfactants before entering the blood stream. Alliance recently merged with Fluoromed Pharmaceutical, which developed the PFOB technology ("The Pink Sheet" Oct. 24, 1988, T&G-13). Otisville was founded in 1983 and went public with a $ 2.97 mil. offering in March 1984. The company used private placements in 1987 and 1988 to acquire Fluoromed and to raise approximately $ 4 mil. for working capital. Alliance will retain all manufacturing rights of the products under the Boehringer agreement. The letter of intent is "subject to certain conditions, including the execution of a definitive agreement no later than May 26, 1989."

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