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Executive Summary

SCHERING-PLOUGH $20 MIL. CNS DRUG R&D AGREEMENT WITH CEPHALON covers the development of new drugs for Alzheimer's disease and other neurodegenerative disorders. Under terms of the five-year agreement, announced on May 31, Schering will receive exclusive worldwide rights to certain technology and to the products and technology emerging from the collaborative R&D effort. Cephalon, a privately held neuroscience R&D firm in West Chester, Penn., will receive royalties from net sales of any successfully commercialized product and an option to manufacturing rights. "The innovative scientific program outlined in the agreement will focus on two highly integrated approaches," the firms said in a joint press release. "One is to regulate specific genes in the nervous system, which will affect the prognosis of several neurodegenerative diseases. The second approach is to prevent the formation of amyloid plaques." The latter effort centers on the development of inhibitors of clipsin, a chymotrypsin-like protease recently co-discovered by a Cephalon scientist. Cephalon senior scientist and protease development head Robert Siman, PhD, and co-author Robert Nelson, PhD, reported on the discovery of clipsin in the March 1990 Journal of Biological Chemistry. Amyloid plaques are a twisted mass of protein fragments that form fibrous patches in the brain. The plaques are considered by some to be either an engendering event of Alzheimer's or one of the main steps in the disease's development. Clipsin inhibitors theoretically could halt or reverse the nerve degeneration of Alzheimer's. Schering described the Cephalon agreement as a complementary area to its own in-house CNS discovery effort. Schering-Plough's ongoing R&D efforts focus on potential analgesics and therapies for schizophrenia, the company said. Schering's discovery efforts are focusing on age-associated cognitive disorders, Alzheimer's, multi-infarct dementias and stroke. The clipsin development program is one of several such efforts being carried out at Cephalon. None have yet advanced to clinicals, but the company is planning to file its first IND application. Other R&D projects include: a peptide program to discover "active" (and thus smaller) segments of the large molecules; human nerve growth factor and NGF receptor; choline acetyltransferase development factor (CDF) for ALS (Lou Gehrig's Disease); and work on therapies for Parkinson's disease and stroke. The proposed IND would be for CDF and/or other growth factors for the treatment of ALS. Established in 1987, Cephalon has undergone three rounds of private financing that had raised a total of $12 mil. prior to the Schering agreement. Initial venture capital backers were Burr Egan Deleange & Co. and Hambrecht & Quist. The Schering-Plough agreement is the first for a therapeutic drug development program. Cephalon has an approximately $250,000 reagent contract with Boehringer Mannheim. The company's principals include ex-DuPont scientists Frank Baldino, PhD, who founded Cephalon, and Michael Lewis, PhD, and James Kauer, PhD, co-founders. Baldino, whose background is in gene expression work, serves as president and research director; Lewis is director of pharmacology, while Kauer is Cephalon's director of chemistry. Jack Lief, the VP of corporate development, joined Cephalon from six years at Green Cross. Immediately prior to that, he spent 11 years with Abbott Labs. Cephalon has 35 employees and works out of a 10,000 sq. ft. facility soon to expand to 31,000 sq. ft.

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