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SMITHKLINE BEECHAM BACKING GENELABS' HEPATITIS E VACCINE R&D

Executive Summary

SMITHKLINE BEECHAM BACKING GENELABS' HEPATITIS E VACCINE R&D with up to $12 mil. under terms of a three-year agreement announced jointly by the companies on Sept. 3. SmithKline Beecham will support Genelabs' R&D with license and milestone payments and current and future equity investments, "which have the potential of reaching a total of in excess of $12 mil.," the companies said. Genelabs, a Redwood City, Calif.-based biopharmaceutical firm, also will get "future royalty payments upon product introduction into the market." The company anticipates that a hepatitis E vaccine will go into human trials one year from now. A vaccine prototype has shown good results in animal studies, Genelabs maintains. The hepatitis E vaccine deal is the first collaboration between SB and Genelabs. As part of the arrangement, SmithKline Beecham has agreed to purchase 219,178 shares of Genelabs' common stock, worth approximately $2 mil. SB's initial stock purchase will give the company a 1.2% stake in Genelabs. Following issuance of new shares, Genelabs will have approximately 18.1 mil. shares outstanding. SB also will give Genelabs "a $2 mil. interest-free loan convertible into common stock within two years at the market price at the time." The stock conversion may take place when Genelabs has a secondary offering of common stock. At the end of June, Genelabs had just over $20 mil. in cash. Genelabs will have comarketing and comanufacturing rights to the vaccine in the Asia-Pacific rim, which includes China, Hong Kong, Singapore, Korea, Indonesia and India. In these same countries, Genelabs also will have comarketing rights to a combination product of the hepatitis E vaccine and SB's hepatitis A vaccine Havrix. In June, SB filed an application with FDA for its hepatitis A vaccine, which currently is marketed in the U.K., Switzerland and Belgium. SB will have exclusive rights to the hepatitis E vaccine in the rest of the world, including Europe, Japan and the U.S. Genelabs, along with the Centers for Disease Control, were "the first to isolate molecular clones" of hepatitis E virus in 1988, the company noted. Hepatitis E is a debilitating and fatal water-borne disease that also can be transmitted through oral and fecal materials. The virus is fatal in 20% of pregnant women who get infected. Although the virus is found world-wide, the highest incidence of hepatitis E is in Asia, Africa, Latin America and Russia. Studies of the U.S. blood supply have shown that more than 2% of the population, or about 4.8 mil. people, have been exposed to the virus, Genelabs said. The agreement also involves the development of a hepatitis C vaccine for which SB "will receive a limited option for Genelabs' hepatitis C virus vaccine technology." SB markets a hepatitis B vaccine, Engerix-B. Genelabs expects to complete Phase II trials of its lead product, the AIDS drug alpha-trichosanthin (GLQ223), at the end of 1993. By the close of this year, Genelabs anticipates filing an IND with FDA for CL331, a semi-synthetic derivative of podophyllotoxin, for treating multi-drug-resistant small-cell lung cancer.
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