Epimmune Inc. plans on getting a little bigger.

The San Diego-based company entered a preliminary merger agreement with Anosys Inc. to create a combined entity focused on immunotherapeutics and products to treat cancer and infectious diseases. Robert De Vaere, Epimmune's vice president of finance and administration as well as its chief financial officer, declined to disclose the number of Epimmune shares that would be issued to Menlo Park, Calif.-based Anosys as part of the all-stock transaction.

Robert Chestnut, Epimmune's vice president of research and development, pointed to a technological synergy between the two companies.

"They have developed some very exciting technology around delivery of antigens to stimulate an immune response, and we develop epitopes to stimulate T-cell responses," he told BioWorld Today. "Their technology is very efficient at delivering epitopes to stimulate cellular immune responses."

Epimmune said the combination of its epitope technology with Anosys' exosome delivery technology would create a company poised to pursue therapeutics that activate antigen-specific immune responses, especially in the area of cancer vaccines. In fact, the companies share a cancer vaccine history. In September 2001, Epimmune granted to Anosys a nonexclusive license to certain cancer antigens for use in its cancer therapy program. Specifically, the license covered certain patented and nonpatented rights to Epimmune's universal breast, colon, lung and prostate epitope packages for use in ex vivo cancer therapy.

"That's really where the relationship started," Chestnut said. "We got to know their technology; they obviously were interested in our epitope technology and the use of those epitopes in the cancer setting. We got to know the people and actually have continued an interaction since that time."

Now the combined company will work as one on such development, including Anosys' most advanced programs that developed from the original license with Epimmune. Anosys has received FDA clearance to begin Phase II therapeutic vaccine trials in lung cancer and melanoma.

The pending studies are based on findings reported in the past year on Anosys' acellular anticancer dexosomes cancer vaccine. In October, Phase I results in melanoma patients showed that three of six patients who received an active dose of the vaccine (dexosomes loaded with 100 ug/mL tumor-specific peptide) achieved clinical benefit. Separate data reported in May showed three of seven immunized patients achieved prolonged disease stabilization.

Established in 1997, Epimmune also adds a fair share of clinical programs to the combined company. Last month Epimmune received FDA clearance to start Phase I/II trials of its EP-2101 therapeutic, multi-epitope vaccine in lung and colorectal cancer patients. Two separate studies, one for each indication, will involve about 25 patients who have had surgery to remove the majority of the cancer cells. Epimmune said final data analysis is expected to be complete in the first half of next year.

Its development programs also include ongoing Phase I/II trials of therapeutic vaccines for HIV. Beyond the internal development programs, the companies will combine their involvement in several partnered and sponsored programs. Epimmune is involved in a collaboration with Palo Alto, Calif.-based Genencor International Inc. focused on hepatitis B, hepatitis C and human papillomavirus.

"It makes a lot of sense to put these technologies together under one umbrella and achieve the financing needed to take these forward and develop products as quickly as possible," Chestnut said. "Certainly getting the Phase II trials going, using their delivery system and epitopes delivered with that, is a high priority. We'll be getting their Phase II trials ramped up and moving forward very aggressively while continuing to bring the current programs that are ongoing at Epimmune along at the same time."

Simultaneous with the merger, Epimmune withdrew its registration statement to sell 7.25 million common shares, a sale proposed in October. In its prospectus, Epimmune said a share price of $1.32 would result in gross proceeds of about $9.6 million. At the time, the company had reported cash, cash equivalents and short-term investments of about $11.9 million, as of Sept. 30. Epimmune has about 12.3 million shares outstanding. (See BioWorld Today, Oct. 28, 2002.)

The newly formed entity would maintain San Diego headquarters, with additional manufacturing facilities in Evry, France and Menlo Park. Anosys, founded as AP Cells, employs about 40 people, according to Epimmune.

But De Vaere said decisions regarding Anosys' personnel have not been made, nor have plans been finalized for the combined entity's name. The transaction remains subject to a definitive merger agreement, approval by the companies' respective shareholders, commitments for capital resources to fund the combined company's operations and various other conditions.

"We need to get commitments for capital resources to fund the combined company," De Vaere said. "That's our focus for the next period of time."

Anosys was founded by two French researchers who were previously with Strasbourg, France-based Aventis SA, which is one of Anosys' three major shareholders, the other two being Kirin Brewery Co. Ltd., of Tokyo, and the venture capital firm BankInvest Biomedical Venture, of Copenhagen, Denmark. The company was created at the end of 1997 and has raised total funds of $35 million. It established a French subsidiary, Anosys SA, which has a research and development center at Evry, the site of France's national biotechnology science and business park.

Epimmune's stock (NASDAQ:EPMN) gained 17 cents Thursday, or 20 percent, to close at $1.02.