Tercica may receive up to $53M in equity payments, opt-in payments, R&D reimbursement, and milestone payments.

Tercica and Genentech will combine two drugs, one from each company’s portfolio, for the treatment of short stature, adult growth hormone deficiency (AGHD), and potentially other metabolic disorders. The deal includes development, manufacture, and worldwide commercialization of Genentech’s Nutropin AQ® in combination with Tercica’s Increlex®.

Under the terms of the collaboration, Tercica is eligible to receive a total of up to $53 million in equity payments, opt-in fees, R&D cost reimbursement, and milestones. In connection with the transaction, Genentech will purchase 708,591 shares of Tercica’s common stock for $4 million.

Nutropin AQ and Increlex were originally designed and formulated so that the therapies could be combined and potentially given as a single, daily injection. Tercica plans to initiate Phase II development in 2008 of one combination product for patients with low IGF-1 levels and short stature not associated with growth hormone deficiency and a second combination product for patients with AGHD.

Tercica will fund and lead initial development efforts for both combination products. Genentech has certain rights to opt-in to the development programs for both products. The opt-in rights remain open until completion of a Phase II study for each candidate that is sufficient to enable a pivotal trial.

Upon exercise of any opt-in, Genentech shall reimburse certain incurred R&D costs. Following such exercise by Genentech, a cost and profit share structure will take effect for all future development and commercial activities of both combination drugs. Genentech will retain certain commercialization rights, including the right to co-promote both medicines. If Genentech does not exercise any of its opt-in rights, then Tercica will have full development and commercialization rights and will owe Genentech royalties on worldwide sales.

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