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Executive Summary

SCHERING AG TRYING TRITON BIO TO EXPAND CANCER R&D via the proposed cash acquisition of the pharmaceutical R&D operations of Triton Biosciences. Berlin, Germany-based Schering AG announced Sept. 20 that it is acquiring the pharmaceutical R&D portion of Alameda, Calif.-based Triton Biosciences, a wholly-owned drug and diagnostics biotechnology subsidiary of Shell Oil. Schering Berlin Inc. of Cedar Knolls, N.J., the holding company for Schering AG's U.S. operations, will be the vehicle for the acquisition, which is expected to close in the latter half of October. The acquisition will "substantially expand" Schering's cancer R&D capacity, the firm said, "combining traditional research and development conducted in Germany with the biotechnology approaches used by Triton." The addition of Triton's biotech capacities will enhance the operations of Schering's cardiovascular biopharmaceutical subsidiary Codon. The closely held South San Francisco-based firm, which is working on anticoagulant proteins, was acquired by Schering AG in May. Schering notes that it will not have "a total of more than 250 people" at Triton and Codon engaged in R&D. Schering's oldest U.S. pharmaceutical holding is the imaging agent and contraceptive product firm Berlex Labs, which it acquired in 1980. Wayne, New Jersey-based Berlex currently has about 900 employees and generates annual revenues in the $100 mil. range. The German parent also owns agrochemical, electroplating, industrial chemical, and naturally-derived chemical businesses in the U.S. Neither management nor organizational configurations for Schering's U.S. pharmaceutical holdings have been decided, Schering said. Berlex Labs is headed by a management unit led by President Jorge Engel. Triton's president is Richard Love. Shell has publicly been seeking a buyer for Triton since this spring when it said the business was "no longer sufficiently tied" to its petrochemical focus to retain ("The Pink Sheet" April 23, T&G-8). At the time, the petrochemical giant declined to put a value on Triton. The terms of the Schering cash deal are not being disclosed, but Schering said it would additionally make "certain payments" to Shell depending on the success of products currently in Triton's pipeline. In the past, Triton has attempted to quantify Shell's long-term commitment to building a niche in the drug industry by noting that the oil company had devoted over $100 mil. to the research effort at Triton. Shell's withdrawal from the drug industry marks another abortive attempt by in oil company to expand into the pharmaceutical/health care field. Shell showed persistence in staying with the project for the better part of a decade, but the internal development of a biotech business was apparently too long a project with too small a return in the long run for a company of Shell's size. Other ventures such as Sun Oil's takeover attempt of Becton-Dickinson in the late 1970s previously have failed. Ethyl Corp., a chemical company with strong ties to the petroleum industry, is currently trying to build a position in the pharmaceutical industry around a conglomeration of small businesses (Nelson R&D, Rucker, and several ex-Glaxo lines) under the name Whitby Pharmaceuticals in Richmond, Va. The acquisition announcement follows by nine days an FDA advisory panel's Sept. 11 recommendation that Triton's most advanced product, the orphan drug I.V. Fludara (fludarabine phosphate), be approved for the treatment of chronic lymphocytic leukemia in patients refractory to at least one prior therapy ("The Pink Sheet" Sept. 17, p. 3). The company recently has begun human clinicals on an oral form of Fludara. Schering maintains that the deal with Shell Oil was not contingent on Fludara's approval recommendation. With the purchase of Triton, Schering is presumably taking over that company's rights to the Cetus-Triton joint venture developing Betaseron, a recombinant beta interferon currently in Phase III clinicals for multiple sclerosis. The trials are scheduled for completion in mid-1991. Triton, the majority partner in the joint venture, has the option to acquire worldwide marketing rights to Betaseron. The product is also in an expanded Phase III trial in combination with AZT (Burroughs Wellcome's zidovudine, Retrovir) as an orphan for AIDS and ARC patients. The product is in Phase II for anticancer indications. Triton has several other drugs in clinicals or expected to enter clinicals next year. ADZU (azidouridine) is a nucleoside analog similar to AZT being studied for HIV. FEAU, another nucleoside analog, will be studied for herpes and hepatitis B, and TGF-alpha (biosynthetic transforming growth factor-alpha) is slated for clinicals for wound healing and cancer therapy. Triton has co-exclusive worldwide marketing rights to TGF-alpha under a cross-licensing arrangement with Bristol-Myers Squibb. Triton's diagnostics business is not included in the proposed deal. The firm's partnership with Technicon Instruments, TriTech, launched the DPA-1 serum protein analysis test in 1988 and expects to launch the Technicon Immuno-1 automated assay system next year.

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