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Deltagen Collaborates with Eli Lilly on Secreted Proteins, Reports Sharply Higher Q2 Revenues

NEW YORK, August 2 – Deltagen has agreed to study specific secreted proteins for Eli Lilly in a collaboration to identify and commercialize proteins with therapeutic value, Deltagen said Thursday.

“Lilly will provide us with a substantive number of targets to analyze their therapeutic value,” Deltagen CEO Bill Matthews said. “That number is significant to drive forward drug development in both companies’ pipelines.” Matthews did not provide an exact number of proteins or which disease area the companies would target.

The research arrangement does not require Lilly to pay Deltagen any upfront or milestone fees, Matthews said in a conference call with investors. Instead, revenue from the collaboration will come from any therapeutic proteins Deltagen commercializes, or from royalties that Lilly pays Deltagen on therapeutic proteins Lilly commercializes. 

Deltagen must also pay Lilly royalties on any proteins Deltagen commercializes. The parties did not disclose further financial details.

Matthews said the two companies would jointly decide which proteins to study via Deltagen’s mouse gene knockout models. But the companies did not disclose how they would divide ownership of the proteins once Deltagen has completed its gene function studies.

Separately, Deltagen released its financial results for the second quarter of the year, reporting revenue of $2.7 million, a 921 percent jump from the comparable period a year ago. The company attributed its rise in income to revenue from licensing the DeltaBase database of mouse gene function data, which the company released in the third quarter of last year. 

The company’s total costs and expenses, however, rose to $15.7 million, up from $9.3 million during the second quarter a year ago. Investments in expanding the company’s pipeline of gene targets and development of proprietary databases primarily accounted for the rise in total expenses, as R&D outlays rose to $10.4 million from $6.8 million in the comparable period a year ago.

Deltagen reported a net loss for the quarter of $11.9 million, or 41 cents per share, compared to $8.9 million, or $5.27 a share for the second quarter a year ago. A poll of three brokers conducted by First Call/Thomson Financial had predicted a loss of 36 cents per share.

As of June 30, the company had $102.5 million, compared with $110.8 million on March 31.

A week ago, Deltagen said that it had acquired Arcaris, a Salt Lake City, Utah-based functional proteomics company, for $450,000 and 765,000 shares of newly-issued Deltagen common stock.

Deltagen’s subscribers to DeltaBase, its database of mammalian gene function information, are GlaxoSmithKline, Pfizer, and Vertex Pharmaceuticals. The company also provides drug target discovery services for GlaxoSmithKline, Merck, Pfizer, and Schering-Plough Research Institute.

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