Genentech, Tercica sign growth hormone drug deal

BOSTON, July 10 (Reuters) - Biotechnology company Tercica Inc. TRCA.O said on Tuesday it has signed an agreement with Genentech Inc. DNA.N to develop combination products to treat short stature and metabolic disorders.

Tercica will fund and lead the development of two products that combine Genentech's human growth hormone Nutropin and Tercica's insulin-like growth factor Increlex into a single daily injection.

Genentech, the world's second-biggest biotechnology company, can decide whether to become a full development partner at any time up until the completion of mid-stage, or Phase II, clinical trials.

Genentech has bought Tercica shares worth $4 million and could pay Tercica an additional $49 million if it exercises all its options under the agreement and continues to participate in the development of the drugs after the end of the Phase II trials.

If Genentech decides to drop out, and Tercica brings the products to the market on its own, Genentech will receive a royalty. Tercica said it plans to begin Phase II trials by early 2008.

Insulin-like growth factor-1, or IGF-1, is needed by children to promote normal growth. Tercica is betting that a combination of Increlex and human growth hormone will work better than either product alone in children with short stature.

The second product will be for adults with normal height whose growth hormone deficiency manifests itself in abnormalities in body composition, such as increased body fat and reduced lean muscle mass.

Tercica said the combination product may have a role to play in treating obesity and type II diabetes.

(Reporting by Toni Clarke)

((Editing by Dave Zimmerman; Reuters Messaging, toni.clarke.reuters.com@reuters.net, 617-367-4165)) Keywords: GENENTECH/TERCICA

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