Cetus Buying Back Rights to Sell Products

Cetus is buying back the rights to sell several genetically engineered products, including its promising anti-cancer drugs, in the United States from its limited research and development partnership, the company said Monday.

The move, which will cost $25.5 million, is similar to ones recently undertaken by Genentech and California Biotechnology, two other San Francisco Bay Area biotech companies. As such, it is yet another sign of the fledging industry’s metamorphosis from laboratory-bound entities into commercial enterprises.

As with the other biotech buybacks, Cetus’ action was designed to give it greater control of the products developed by the partnership--and a greater portion of profits that might be generated. Those include proposed anti-cancer drugs and diagnostic products, and a test for the AIDS virus.

Cetus said it was exercising the option it was granted when Cetus Healthcare Limited Partnership I was established in 1983. Cetus is paying $19 million to the limited partners, for ownership of the products to market and sell them in the United States. That payment also will reduce future royalty payments to the limited partners.

The $25.5-million cost of the program includes $6.5 million of partnership debt that Cetus will assume and will be taken as a charge against earnings in the quarter just ended Dec. 31, 1986, which is Cetus’ second fiscal quarter. Robert Fildes, Cetus president and chief executive, said the charge will result in a quarterly loss for the Emeryville, Calif.-based company.

At the same time, however, Cetus said it raised $62 million in the first round of a public offering of another limited partnership. This one, called Cetus Healthcare Limited Partnership II, is designed to fund the development and clinical testing of Cetus’ products in Europe--the European equivalent of Partnership I.

None of Cetus’ human health-care products has been approved for sale in the United States yet. However, its interleukin-2 product, named Proleukin, is in second-stage clinical trials, being tested in about 60 programs involving more than 1,000 cancer patients.

Fildes said the moves by Cetus, Genentech and CalBio mean that “each of us recognizes we’re far enough down the development cycle (of the products) and have high confidence in the commercialization of the products. . . . I see it as part of the transition of the industry.”

The three deals each were begun at least six months before originally anticipated. The buyouts will be helpful in improving the industry’s image and also in helping to raise additional capital for marketing programs.

“The R&D; partners have done well on their investments,” said G. Steven Burrill, chairman of the high-technology group at Arthur Young’s San Francisco office. “So now, biotechnology can be seen as a good investment--especially as the companies get set for new rounds of financing--and not just for tax purposes.”

Last week, Genentech completed the early buyout of its two limited research and development partnerships, gaining sole rights to profits from Protropin, a human growth hormone already being sold, and from Activase, a unapproved drug that analysts say could generate $1 billion in sales.

CalBio, a Mountain View, Calif., firm, said it has so far obtained 48% control of its limited partnership in an offer of stock, warrants, cash and debt forgiveness that it made in October.