ALTEON's AMINOGUANIDINE PHASE II/III TRIALS FOR DIABETIC NEPHROPATHY

ALTEON's AMINOGUANIDINE PHASE II/III TRIALS FOR DIABETIC NEPHROPATHY are expected to begin in the first half of 1992, the company said in a preliminary prospectus for its initial public offering. Initial development of aminoguanidine will focus on preventing the progression of two major complications of diabetes -- nephropathy and end-stage renal disease -- which in the U.S. affect an estimated 800,000 and 48,000 diabetics, respectively, Alteon said. The trials will be funded by Marion Merrell Dow and may take "at least" two to three years to complete, according to the prospectus. MMD entered into a development and commercialization agreement with Alteon, previously known as Geritech, in December 1990 ("The Pink Sheet" Dec. 24, T&G-5). The deal includes an initial $ 5 mil. nonrefundable payment and a $ 5 mil. equity investment by MMD in exchange for joint marketing rights in North America. MMD has until Dec. 11 to exercise an additional $ 5 mil. option to acquire European rights. The two firms will share profits in the joint marketing territories, with Alteon entitled to up to 50% of profits, depending on annual sales levels. Post-offering, MMD would beneficially own 8% of Alteon. Net proceeds from Alteon's proposed 2.5 mil. share offering at $ 13 per share could total $ 29.9 mil., the firm estimates; roughly half the proceeds are tentatively designated for R&D, with the balance going toward the establishment of a sales and marketing force, facilities expansion and general corporate purposes. Alteon is required to provide 25% to 50% of the "sales effort" in North America for products developed with MMD. The agreement also calls for Alteon to supply MMD with commercial quantities of aminoguanidine and other potential products included in the joint development program. MMD will manufacture the final dosage forms for commercialization. Alteon's R&D program is focused on creating products that "inhibit, reverse and measure damage to cells, tissues and organs caused by advanced glycosylation end-products (AGEs) formed as a result of glucose in the body's circulatory system," the prospectus notes. The AGEs damage proteins by forming cross-links with other proteins and may be a significant factor in causing complications associated with diabetes as well as aging-related complications such as atherosclerosis. AGE-formation inhibitors represent the most advanced aspect of Alteon's research; in addition to aminoguanidine, the firm is conducting preclinical studies on second-generation inhibitors. Alteon is also studying macrophage stimulators for their potential in removing AGEs and thereby reversing certain diabetes-related diseases. A third part of the R&D program is the development of diagnostic tests to monitor drug therapy and assess AGE levels in diabetic patients. Alteon has spent $ 10.4 mil. on R&D since its establishment in October 1986. If successful, the proposed $ 30 mil. public offering would nearly match the amount the Northvale, N.J.-based R&D firm has raised through a combination of private financings ($ 15.9 mil.) and payments related to collaborative agreements ($ 12 mil.). In July 1989, Yamanouchi Pharmaceutical paid $ 7 mil. for an exclusive license to market Alteon products in Japan, South Korea, Taiwan and China. Yamanouchi also paid $ 3 mil. for a pre-offering 9.2% stake in Alteon and is funding the firm's preclinical studies. Post-offering, Yamanouchi would beneficially own 7.1% of Alteon. Other investors with stakes over 5% after Alteon's public offering will include Advanced Medical, the largest corporate investor with a 13.1% beneficial stake, Montgomery Medical Ventures (9.3%), MMD (8%), Chancellor Capital Management (7.7%), Concord Investors (6.9%), Rockefeller University (6.1%) and Montgomery Medical Ventures (6%).