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AGOURON GUARANTEED AT LEAST $24 MIL. FROM JAPAN TOBACCO R&D DEAL

Executive Summary

AGOURON GUARANTEED AT LEAST $24 MIL. FROM JAPAN TOBACCO R&D DEAL for "the joint discovery, development and commercialization of novel therapeutic drugs which act on key proteins related to the human immune system." The R&D collaboration, announced Dec. 17 by San Diego-based Agouron Pharmaceuticals, includes research payments and an equity investment from Tokyo-based JT that will total $24 mil. at a minimum and could add up to over $30 mil. during the life of the agreement. Agouron would not name specific disease areas to be researched but said the effort will involve "new protein targets" that the company has not approached before. AIDS and cancer, which are the focus of the company's current pipeline, are not among the targeted therapeutic areas, Agouron said. The agreement includes the purchase by JT for nearly $3 mil. of 155,844 shares of newly-issued Agouron common stock at a price of $19.25 per share, a premium of approximately 45% over the stock's recent trading price of $13.25. The stock purchase gives JT a 2% equity stake in Agouron. Under the agreement, the stake cannot be expanded to more than 2.25% and is protected against dilution should Agouron issue more stock. In addition to the stock purchase, Japan Tobacco will make semi-annual payments totaling $21 mil. over the next three years. "If certain technical progress is achieved by the R&D effort," Agouron said, total payments by JT after three to four years could amount to "more than $28 mil." Under the agreement, JT will lead development and commercialization efforts in Asia, while Agouron will lead the effort in Europe and North America. Agouron and JT "will have co- exclusive rights to market jointly-developed products in all countries of the world," meaning that all products resulting from the collaboration "will be jointly owned," with each firm having the option to co-promote the products in the other's territory, Agouron said. The agreement is Agouron's third with a major pharmaceutical firm. Schering-Plough is working with Agouron to rationally design a class of oncology drugs targeting the ras oncogene ("The Pink Sheet" April 29, 1991, T&G-6). Eli Lilly holds a 5% equity position in Agouron as a result of a 1988 R&D agreement covering AIDS and cancer ("The Pink Sheet" April 25, 1988, p. 19). Agouron's AG-85 candidate for treatment of psoriasis was tested in one pilot study completed in April of this year. Based on the results of that study, a newer, higher-strength formulation of the topical inhibitor of the enzyme thymidylate synthase (TS) will be used in a 20-patient pilot study beginning in January. The company's lead solid tumor treatment candidate, AG-337, a lipophilic TS inhibitor, entered a Phase I study in the U.K. in November. An IND for another potential solid tumor treatment, AG- 331, should be filed by year-end and a Phase I trial should begin in early 1993 at the University of Southern California, Agouron said.

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