Japanese Earmark Up to $40 Million for AIDS Drug Firm

Green Cross Corp., an Osaka, Japan-based pharmaceutical company, has agreed to pump as much as $40 million into Viagene, a San Diego-based start-up that is developing a drug to treat patients infected with HIV, the virus that causes AIDS.

In return, Green Cross will hold worldwide marketing rights for the drug, which is expected to begin human clinical trials during 1992, Viagene Vice President Brad Gordon said Thursday.

Viagene, a 4-year-old, privately held company, will retain manufacturing rights and receive royalties for the drug, which company officials believe could help the immune system destroy HIV-infected cells.

The worldwide marketing agreement is unusual, biotechnology industry observers said, because most U.S. companies usually retain marketing rights for their home market. Increasingly, however, major international drug companies “are looking for worldwide rights” when they strike research and development agreements with start-up firms, said Pamela Bridgen, executive director of the Assn. of Biotechnology Cos., a Washington-based trade group.

Viagene’s agreement “might be a vision of the future” in the biotechnology industry, Bridgen said. “With the increasing cost of developing a drug and getting it to market . . . companies want to make sure they get their pay-back” through worldwide sales agreements, Bridgen said.

The cash infusion “is a hell of a good deal for Viagene,” said Jim McCamant, editor of the San Francisco-based Medical Technology Stock Letter. “For $40 million, you can’t argue with them saying ‘OK’ to worldwide rights.”

Green Cross sought U.S. marketing rights for the planned drug because “the largest market for HIV-infected people is, in fact, in the U.S.,” Gordon said. “The incidence (of HIV) in Japan is very low.” Green Cross also has a “strong presence” in Europe, home to another large HIV-infected population, Gordon said.

Green Cross, which reported $700 million in sales during 1990, has a “strong U.S. presence” through Alpha Therapeutics, a Los Angeles-based subsidiary that manufactures and markets blood products, Gordon said. Viagene’s planned HIV drug will dovetail with Alpha Therapeutics’ marketing efforts, Gordon said.

Green Cross acquired Alpha Therapeutics, one of the nation’s largest producers of blood products, in 1978. The company’s products are used to treat hemophilia, immune deficiencies, shock and trauma. Alpha has 1,800 employees in the U.S., including 1,200 at its Los Angeles plant. Alpha’s sales have increased “ten-fold” in recent years to $200 million, Alpha president Ed Matveld said Thursday.

Viagene will receive portions of the $40 million during a four-year period. Distribution will be determined by Viagene’s ability to meet “certain milestones” as the product moves through R&D; and into production, Gordon said.

The $40 million also includes a $4.7-million equity investment being made by Green Cross. Viagene previously had raised about $13 million during four venture capital rounds.

The company, with 45 employees, was spun off from San Diego-based Gensia Pharmaceuticals, another biotech firm, in 1987. David Hale, Gensia’s president, also serves as chairman of Viagene’s board.