BRISTOL-MYERS SQUIBB TO BUY $ 56 MIL. OF TAXOL FROM HAUSER CHEMICAL RESEARCH

BRISTOL-MYERS SQUIBB TO BUY $ 56 MIL. OF TAXOL FROM HAUSER CHEMICAL RESEARCH during the next three years, according to a description of the supply contract between the companies in a recent 2 mil.-share stock offering by Hauser. The contract is an outgrowth of Hauser's three years of work on taxol production. The company began producing the anti-cancer agent from Pacific yew bark for the National Cancer Institute in 1988 and began supplying Bristol-Myers Squibb in "early 1990." Taxol is currently in Phase III trials for the orphan indication of refractory ovarian cancer, Phase II trials for breast cancer and is being researched alone and in combination with other agents for several additional cancer indications ("The Pink Sheet" July 1, T&G-7). Hauser claims that in clinical trials conducted by the NCI and Bristol, taxol has shown "a 30% objective response rate in patients with relapsed or refractory ovarian cancer" and "in one study, approximately 50% of the 25 patients with advanced stages of breast cancer responded to treatment with taxol." Hauser says it has improved the extraction methods. According to Hauser, this extraction technique "can produce a kilogram of taxol from less than 20,000 pounds of Pacific yew bark," compared to 30,000 pounds of bark required by "conventional" processes. The Boulder, Colo. company claims to have a current production capacity of 24 kg of taxol per year and is building a $ 10.5 mil. facility which will enable the company to produce 100 kg per year. The three-year deal signed with Bristol on Aug. 15 will automatically be extended for periods of two years unless canceled by Bristol. According to Hauser, the contract gives Bristol the right of first refusal to "any taxus resin and bulk taxol produced by Hauser in excess of stated minimum amounts." Bristol will provide Hauser with 24-month forecasts of its need for taxol so the supplier can collect and process the appropriate amount of bark. Hauser indicates that the extraction process "takes approximately two months to complete." Sales of bulk taxol, taxus resin, and yew bark to Bristol currently represent the majority of Hauser's business; for fiscal year ended April 30, revenues from Bristol ($ 3.7 mil.) were 50% of Hauser's total revenues and for the quarter ended July 31, Bristol's business accounted for 92% ($ 7.8 mil.) of total revenue. The size of the three-year contract for raw materials indicates the extent of Bristol's commitment to the development of the cancer product -- and by implication the company's assessment of its commercial potential. The Oct. 3 initial public offering raised between $ 29 mil. and $ 33 mil. (2 mil. shares at $ 15.50 per share with a 333,750 share over-allotment option). The underwriters were Dain Bosworth Inc. and Kemper Securities Group, Inc. The capital raised by the offering will be used to acquire and equip the new taxol-producing facility and for R&D costs. Another potential supplier of taxol, ESCAgenetics Corp., was awarded $ 800,000 by NCI to study the possibility of scale-up and economic production of taxol by plant cell culture. The three-year award, announced Sept. 30, will also be used for the production of "compounds functionally similar to taxol," said ESCAgentics. According to the company, ESCAgenetics' cell culture method, in which "cells from roots, leaves or stems are isolated and grown in culture using fermentation processes which stimulate the cells to produce taxol" produces laboratory quantities of unpurified taxol "in higher concentrations than those found in [Pacific yew] bark." Hauser maintains that its taxol production process "is the only large-scale operation that currently meets GMP standards established by the FDA."