GENETICS INSTITUTE WILL GET ROYALTIES FROM SANDOZ AND SCHERING

Executive Summary

GENETICS INSTITUTE WILL GET ROYALTIES FROM SANDOZ AND SCHERING for recombinant GM-CSF under a joint development and marketing agreement announced Nov. 17. Genetics Institute "will receive identical royalties on both companies' worldwide granulocyte macrophage colony stimulating factor at the same rate due under its existing agreement with Sandoz," President Gabriel Schmergel noted. Genetics Institute also stands to gain revenues from the manufacture of GM-CSF in addition to royalties from sales. Under an earlier licensing agreement, Genetics Institute is supplying mammalian cell culture-based GM-CSF to Sandoz. "If the product selected for commercialization is manufactured in a mammalian cell culture system, Genetics Institute would supply substantial quantities of the drug to both Sandoz and Schering-Plough for a minimum five-year period," Schmergel added. Schering's agreement with Sandoz effectively aligns two potential U.S. players in GM-CSF - Genetics Institute and Schering-Plough - against the third, Seattle-based Immunex. All three have had U.S. patent applications pending since 1984. "The agreement between Sandoz and Schering-Plough reflects Schering-Plough's recognition that Sandoz appears to have the superior patent position, which it acquired from Genetics Institute, and would likely obtain dominant patent rights on GM-CSF," Schmergel continues. In some ways, the move resembles Schering's 1985 pact with Roche that created an effective U.S. cross-license for recombinant alfa interferon. Genetics Institute said its GM-CSF product is currently in transition between Phase II and Phase III for bone marrow transplantation. Schering's product, originally developed by its DNAX subsidiary and produced in E. coli bacteria, is in Phase III for neutropenia associated with chemotherapy and bone marrow transplantation. Other indications under study include: mylodysplastic syndrome (Phase III); non-Hodgkins lymphoma (Phase II); burns (Phase I); AIDS in combination with AZT (Phase I); and AIDS-related Kaposi's sarcoma in combination with AZT and alfa interferon (Phase I). Immunex, which has licensed worldwide rights to its yeast-produced GM-CSF product to Hoechst subsidiary Behringwerke, is in Phase III study for both chemotherapy-related neutropenia and bone marrow transplantation. In addition, the Seattle-based biotech firm has recently begun an AIDS study of GM-CSF in combination with another agent - reportedly alfa interferon. Amgen is also said to have a GM-CSF product in the clinic. Schmergel's remarks on the Sandoz/Schering agreement appear to contain a veiled reference to Amgen, with whom Genetics Institute is locked in patent litigation over recombinant erythropoietin. Schmergel said he hoped the collaboration would become "a precedent for other cooperative efforts" in the biotech area. "The ultimate beneficiary is the patient," he said. "By eliminating long, drawn out battles over patent rights, the agreement conserves our resources and hopefully speeds the delivery of a very promising drug to the patient population."