Washington Editor

Human Genome Sciences Inc. is spinning off its CoGenesys division as an independent company that will focus on the early development of selected gene-based product opportunities and the monetization of certain HGS intellectual property and technology assets.

The CoGenesys division was created in the first quarter this year, and its spin-off is contingent on a successful completion of funding no later than May 31. The move is designed to allow HGS to maintain its primary focus on commercializing its later-stage products in clinical development.

Under the agreement, HGS, of Rockville, Md., will provide a start-up loan of $10 million to be repaid either in cash or equity at the option of HGS, following completion of CoGenesys' funding.

HGS will grant CoGenesys exclusive rights to develop and commercialize biological products based on certain undisclosed human genes, and will grant CoGenesys a license to use its albumin-fusion technology to develop and commercialize certain albumin-fusion proteins for therapeutic use.

HGS has the right to retain an equity investment in CoGenesys, and will receive an up-front payment of cash or equity at its option for the assets, intellectual property and technology licensed to CoGenesys.

HGS also is entitled to a portion of the revenue CoGenesys receives from out-licensing or sales of therapeutic and diagnostic products, and retains the right of first refusal prior to out-licensing by CoGenesys of several unspecified products.

Also, HGS has the option to have CoGenesys continue to perform pre-investigational new drug application work for up to two HGS products per year, with reimbursement for expenses on a cost-plus basis.

CoGenesys will be entitled to milestone payments as any resulting products advance through development.

Craig Rosen, who will be CoGenesys' as executive chairman and chief scientific officer, resigned his current posts as president, chief scientific officer and a director of HGS effective Dec. 31.