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GENETICS INSTITUTE SEEKING $ 50 MIL. IN FUNDING FROM STOCK OFFERING TO COMMERCIALIZE EPO AND FACTOR VIII; BAXTER HOPES FOR PLA FILING IN LATE 1989

Executive Summary

Genetics Institute is looking to raise $ 50 mil. from investors in order to bring erythropoietin and its antihemophilic products to market while continuing to fund projects further back in the pipeline. The firm, headquartered in Cambridge, Mass., will publicly offer 1 mil. shares of $ 50 convertible exchangeable preferred stock, the company said in a July 18 red herring prospectus. The offering of convertible stock, which holders can convert at any time into common stock worth $ 35 a share, will net Genetics Institute $ 48.1 mil. if the offering is fully subscribed. A PLA for Genetics Institute's EPO (Marogen) was submitted to FDA last September by the biotech firm's licensee, Chugai and its U.S. marketing partner, Upjohn. Once approved, the product will face another hurdle in patent court versus Amgen. The patent infringement litigation is currently scheduled to go to trial Aug. 8 in Massachusetts federal court. Genetics Institute's contract with Upjohn-Chugai provides that it will manufacture a portion of their EPO requirements. * Factor VIII:c licensee Baxter Healthcare reportedly is furthest along in the development of the blood clotting factor -- ahead of Genentech and its licensee, Miles, which started clinicals in 1988. Baxter initiated the first clinicals on the blood clotting protein in March 1987, and Phase II/III trials on a large number of patients have been underway for more than a year. Baxter anticipates filing a PLA for Factor VIII in the U.S. "in late 1989 or early 1990," the prospectus states. Under its contract, Genetics Institute will provide Baxter with half of its initial requirement of Factor VIII. Updating Genetics Institute's pipeline, the prospectus discusses other major licensed products in late development: granulocyte-macrophage colony stimulating factor (GM-CSF), tissue plasminogen activator (TPA) and interleukin-3 (IL-3), as well as other projects the firm intends to bring to market itself. Schering-Plough and Sandoz, which have a joint marketing agreement for GM-CSF, plan to file PLAs for several indications in the U.S. and Europe beginning in 1990 ("The Pink Sheet" Feb. 27, p. 7). In addition, the firm's TPA marketing partner Burroughs Wellcome anticipates filing a PLA in "late 1989," Genetics Institute said. However, the future launch of Genetics Institute's version of TPA is uncertain due to patent litigation. * Genentech filed a third lawsuit against the two firms Aug. 1 in Delaware federal court after receiving a U.S. patent covering the rDNA technology it uses to produce TPA. Genentech already has sued the companies based on two 1988 patents covering purified TPA and certain materials used in its production. A trial on the earlier patent has been scheduled for March 1990. The newest patent strengthens Genentech's ability to prevent rTPA manufactured in foreign countires from being imported into the U.S. IL-3 clinical trials, under the direction of marketing licensee Sandoz, will start this year in patients with blood cell deficiencies caused by bone marrow transplants, anemia, chemotherapy or AIDS, Genetics Institute said. Sandoz also has the worldwide rights to IL-6 and is investigating its potential application in blood cell deficiencies and cancer therapy. Goldman Sachs, Robertson Stephens and Shearson Lehman Hutton are managing the offer. Genetics Institute's initial public offering took place in mid-1986.
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