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Executive Summary

GENENTECH EXPANDING XENOVA R&D COLLABORATION WITH $ 20 MIL. agreement to provide research support and become an investor in the British pharmaceutical discovery firm. The Sept. 30 agreement includes a $ 10 mil., two-part equity investment by Genentech in Xenova in addition to research payments totaling $ 10 mil. over a five-year period. Xenova has been working with Genentech since May 1989 under undisclosed terms on small molecule therapeutics in the cardiovascular area. The latest pact is the first to include an equity investment. Genentech and Xenova will collaborate on "projects to discover inhibitors of inflammatory disease, autoimmunity and gastroenteritis as well as agents to promote wound healing," Xenova said. The company also described the logistics of the overseas relationship: "the individual projects will be introduced sequentially on a rolling basis over the next five years and the collaboration will be managed by dedicated project teams which meet alternatively in Slough [Xenova's headquarters, near London] and San Francisco." Describing the goal of the collaboration, Xenova founder and CEO Louis Nisbet said "if we could get a couple drugs on the market, we'd both be delighted." Genentech will retain North American rights to any products arising from the project and the two firms will share rights in the rest of the world, Xenova said. The agreement is the fourth so far this year for Genentech and represents a significant increase in Xenova's funding. Genentech has announced investments totaling $ 64 mil. in biotech startups so far this year. In January, the company committed $ 15 mil. to IIb/IIa inhibitor blood clot prevention R&D with Telios and another $ 15 mil. for cell adhesion molecule research with Glycomed. Just last week, Genentech announced a $ 14 mil. deal with Incyte for septic shock research ("The Pink Sheet" Sept. 30, T&G-8). Xenova, founded in 1987, previously raised (BRITISH POUND) 12 mil. in three financings. Genentech is the firm's fourth North American investor. The other three are venture capital firms: INCO Venture Capital Management, Oppenheimer & Co. affiliate Medical Venture Holdings and Advent International of Boston. Xenova's internal research program is focused primarily on cancer drugs; the firm foresees the possibility of a European franchise that would market drugs designed to treat very specific types of cancer.

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