Somatix Therapy Corp. said its purchase of MerlinPharmaceuticals Corp. earlier this year would help attractcorporate partners, and the move started paying offTuesday with a $20 million investment.

Half of the equity investment from Bristol-Myers SquibbCo. was received by Somatix, of Alameda, Calif. Theother $10 million will be paid when Somatix getsapproval to start Phase II trials for its GVAX therapeuticcancer vaccine, which is expected in the first quarter of1996. The deal gives Bristol-Myers a five-year right offirst offer to collaborate on any internally generatedoncology programs at Somatix.

Bristol-Myers paid $8.36 per Somatix share, a 32 percentpremium to the stock's price over the past five tradingdays. The second investment also will be at a premium.

Somatix's stock, on a significant upswing in the pastmonth, reached its 52-week high on the news, closing up$1 Tuesday, or 16 percent, at $7.38 per share. The pricewas at $4.25 on June 19, 1995 when Somatix announcedcommitments for a $16.5 million private placement.

For New York-based Bristol-Myers, it marks a firstalliance in gene therapy. "This is the first step inimplementing a strategy we have in this whole area," saidRonald Pepin, director, external science and technologyfor Bristol-Myers.

Pepin told BioWorld Today the deal is "more than atraditional right of first offer. If there's an oncologyprogram initiated at Somatix that they want to partner,they have to bring that opportunity to our attention. If wecan't agree on a price, they can't offer it to someone elsefor less than we offered. It's sort of a balance of right offirst offer and right of first refusal."

Somatix's GVAX program is its lead in the oncologyarea. The therapeutic vaccine is in Phase I trials formelanoma and renal cell carcinoma. A trial in prostatecancer is expected to begin soon, and one in colorectalcancer will follow, said David Carter, chairman and CEOof Somatix. He said he's not sure which indication willbe taken into Phase II first, thus triggering Bristol-Myers'payment.

Somatix, near the end of its cash a month ago, now hasabout $25 million, a stock that's rising, and another $14million or so (the Bristol-Myers investment and othermilestone payments) expected within a year.

The acquisition of Merlin transformed Somatix from acompany with retrovirus technology into one with abroad-based delivery technology that includes adenoviraland adeno-associated viral programs. Carter said theMerlin story went over well when Somatix went lookingfor investments. Once the money came, easing fears ofcash problems, the stock started rising. And Basel,Switzerland-based Sandoz Ltd.'s $295 million offer forGenetic Therapy Inc., of Gaithersburg, Md., only added tothe momentum.

Merlin, of Research Triangle Park, N.C., was acquired for3 million Somatix shares, which were valued at about $10million when the deal was proposed last December. (SeeBioWorld Today, Dec. 21, 1994, Feb. 15, 1995, p. 1.)

Pepin said the broad-based technology made it worth a$20 million investment for Bristol-Myers. "We wanted awindow on the gene therapy area," he said, "and wethought Somatix had the best toolbox in the arena."

Pepin would not disclose what Bristol-Myers' strategy isin terms of specific oncology indications, or specific areasof interest the company has in Somatix's technology. Buthe said the world's leading oncology company is alwayslooking to improve its franchise.

Somatix's GVAX technology involves removing apatient's tumor, extracting tumor cells and geneticallymodifying them to contain the gene for granulocytemacrophage-colony stimulating factor. The modified cellsare irradiated to prevent further division, then injectedinto the patient to stimulate an immune response againstcancer cells. n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.