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| |  Development of Growth Factor-Based Therapeutics for CNS Diseases PROVIDENCE, R.I. and SOUTH SAN FRANCISCO, Nov. 26, 1996 -- CytoTherapeutics, Inc. (Nasdaq: CTII) and Genentech, Inc. (NYSE: GNE) today announced the signing of new agreements to develop treatments for Parkinson's disease, Huntington's disease and amyotrophic lateral sclerosis (Lou Gehrig's disease or ALS). The agreements provide for the use of CytoTherapeutics' encapsulated cell technology to deliver several of Genentech's proprietary growth factors, potentially including Neurotrophin-4/5 (NT-4/5), Cardiotrophin-1 (CT-1), Neurturin (NTN) and nerve growth factor (NGF), directly to the central nervous system (CNS). The agreements supercede the 1994 agreement between the companies to develop CNS therapeutics. Under the terms of the agreements, Genentech will purchase $8.3 million of CytoTherapeutics' common stock to fund development of products containing Genentech's growth factors for the treatment of Parkinson's disease. The per share purchase price will be at a premium to the market price. Additional equity purchases and other funding by Genentech is available for future clinical development requirements as determined by the parties. Such additional funding could total more than $50 million. In addition, Genentech has granted to CytoTherapeutics licenses to certain of its factors for the development of treatments for both Huntington's disease and ALS, subject to certain rights by Genentech to gain development and marketing access to the proposed products. "Genentech has invested considerable resources in the initial development of these neuroactive proteins and has a vested interest in expediting their clinical development. We believe that site-specific delivery of these proteins to the central nervous system through CytoTherapeutics' cell based encapsulation system offers a unique approach to developing treatments for neurodegenerative diseases," stated Dennis J. Henner, Ph.D., Vice President of Research at Genentech. "This new collaboration allows CytoTherapeutics to aggressively expand its clinical development programs by accessing several of the most powerful growth factors currently under development," stated Seth A. Rudnick, M.D., Chairman and Chief Executive Officer of CytoTherapeutics. "Utilizing these factors in our delivery technology provides clear commercial opportunities for CytoTherapeutics in three key CNS disease targets and complements our ongoing CNS clinical development programs." Parkinson's Disease Agreement Under the terms of the Parkinson's disease agreement, CytoTherapeutics will perform preclinical and a pilot Phase I clinical study, initially using Neurturin. The cost of these studies will be funded in its entirety by the initial equity purchase. Neurturin, a protein licensed exclusively by Genentech, is homologous to glial cell line derived growth factor (GDNF). By promoting cell growth and protecting certain nerve cells against damage, Neurturin may be useful in treating Parkinson's disease. Should Genentech decide to proceed to Phase II clinical trials, Genentech will purchase additional common stock from CytoTherapeutics to fund the cost of the Phase II trial. Upon Genentech deciding to proceed to Phase III trials, Genentech and CytoTherapeutics will share the cost of development in the United States, and Genentech will pay 100% of the cost of foreign development. In addition, Genentech will provide CytoTherapeutics with a line of credit to fund its share of U.S. clinical development costs. Upon commercialization, Genentech and CytoTherapeutics will share profits in the U.S. at an agreed upon percentage, and Genentech will pay CytoTherapeutics a royalty based on sales outside the U.S. CytoTherapeutics will retain manufacturing rights and will be paid manufacturing costs for products sold. Huntington's Disease Agreement The efforts under the agreement to develop therapeutics to treat Huntington's disease will initially focus on CT-1. Under the agreement, CytoTherapeutics will be responsible for conducting and funding all preclinical and clinical development, either alone or with other companies, subject to specified rights of Genentech to negotiate for worldwide development and marketing rights for the proposed products. Upon commercialization, assuming Genentech has not elected to co-develop and market this program, CytoTherapeutics will pay Genentech a royalty based on worldwide sales. ALS Agreement Genentech has licensed to CytoTherapeutics CT- 1 and NT-4/5 for development as therapeutics for the treatment of ALS worldwide, either alone or with other companies. Upon commercialization, CytoTherapeutics will pay Genentech a royalty based on sales outside the U.S. In the U.S., Genentech retains the right to participate in the commercial development of the program by electing to pay most of the U.S. Phase III development costs. In such instance, Genentech and CytoTherapeutics will share profits at an agreed upon percentage. Should Genentech fail to exercise its option, CytoTherapeutics may proceed with development and pay Genentech an agreed upon royalty. 1994 Agreement Superceded The companies' 1994 agreement established a collaboration for the development of encapsulated cell products based initially on NGF, NT-3 and NT-4/5. The initial focus of the collaboration was the development of a treatment for Alzheimer's disease using NGF. This collaboration is superceded in its entirety by the above agreements, and the parties do not expect to pursue Alzheimer's disease as a target at this time. Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant unmet medical needs. Ten of the currently marketed biotechnology products stem from Genentech science, five of which Genentech markets directly in the United States. Genentech is headquartered in South San Francisco, California, and is traded on the New York and Pacific Stock Exchanges under the symbol GNE. Genentech's world wide web address is http://www.gene.com. CytoTherapeutics, Inc. is a leader in the development of proprietary products and technology designed to deliver therapeutic substances to the central nervous system (CNS). The Company's CNS-focused technology is designed to provide controlled, site-specific and safe delivery of a variety of a novel therapeutic substances across the blood-brain barrier, potentially overcoming a fundamental obstacle in the effective treatment of CNS diseases. The Company is currently developing products for the treatment of chronic pain, ALS, and Parkinson's disease, with additional research efforts directed to several other CNS disorders. For additional information, visit the Company's Internet web site at http://www.cyto.com. Certain statements in this press release include forward looking comments regarding, among other things, funding, product development programs and clinical trial strategies. CytoTherapeutics' actual results may vary materially from those forward looking statements due to risks and uncertainties to which the Company is subject and which are described in Exhibit 99 to the Company's Annual Report on Form 10-K entitled "Cautionary Factors Relevant to Forward Looking Statements."
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