Curis, Inc., a therapeutic drug development company focusing on cancer, neurological and dermatological disease indications, announced that pursuant to the terms of its 2003 collaboration agreement with Genentech it has elected to cease its participation in the co-development of the basal cell carcinoma drug candidate for which the parties had previously announced they were halting enrolment in the phase I clinical trial and had made a decision not to move forward with the molecule in its current formulation.

While data from the phase I trial revealed no significant safety concerns in four weeks of topical treatment, the observed clinical and histological clearance of the basal cell carcinoma was far less than anticipated. The recent results from a final segment of the study showed that the molecule in its current formulation did not down regulate the targeted pharmacodynamic marker in this tumour, one possible explanation being that the drug candidate did not adequately penetrate human skin.

Curis has incurred approximately $8.4 million in co-development costs under the basal cell carcinoma programme through June 30, 2006, and had previously estimated that its share of co-development costs through Phase II clinical trials, had the phase I trial been successful, would have approximated $20 million. Effective as of the August 31, 2006, the co-development termination date, Genentech will be solely responsible for all future costs and development decisions regarding the basal cell carcinoma programme. Should Genentech determine to proceed with development of a topically administered Hedgehog antagonist for the treatment of basal cell carcinoma, Curis would be eligible for cash payments on the achievement of certain future clinical development objectives, if any, as well as a royalty on future product sales.

The decision to discontinue participation in co-development does not impact the ongoing collaboration opportunities between Genentech and Curis, pursuant to which the parties are conducting research in a systemic Hedgehog antagonist programme for the treatment of solid tumour cancers. The systemic Hedgehog programme is a separate drug development programme, with a different mechanism of action and different drug candidates. Pursuant to the systemic programme, Genentech is currently conducting preclinical studies that may support an IND application for one or more drug candidates. Genentech will be required to make a milestone payment to Curis if it files an IND for a drug candidate.

Curis also announced that it anticipates that it will enter into an agreement with the Spinal Muscular Atrophy (SMA) Foundation to conclude its SMA discovery-stage research programme. Curis anticipates that the remaining work for SMA will be completed by the end of November and that all direct costs through such date will be fully funded by the SMA Foundation. While there has been progress made on this programme to-date, as previously announced, Curis has changed its business strategy to deemphasize screening-oriented, discovery-stage research. Instead, Curis plans to concentrate on later-stage preclinical, and to the extent any such programmes are successful, on clinical, development programmes.

In September 2004, Curis received a grant from the SMA Foundation pursuant to which Curis was to receive up to $5.4 million over a three-year period for the identification of therapeutic compounds having the potential to treat SMA. SMA is a neurological disease and is the leading genetic cause of infant and toddler death. From September 2004 through June 30, 2006, Curis recorded approximately $3.4 million in revenues from the SMA Foundation in support of this research. Over the same period, Curis incurred approximately $1 million in additional research expenses in support of this programme. Curis expects that termination of the SMA programme will eliminate much of this incremental cost on a moving-forward basis.

"After careful consideration, we believe that it is in Curis' best interest to cease co-development of our BCC product candidate. Our decision was mainly driven by our belief that significant additional time and expense would be required to bring another topically administered Hedgehog antagonist into clinical testing," said Daniel R. Passeri, president and chief executive officer of Curis, Inc. "In addition, we believe that the removal of the SMA programme from our drug candidate pipeline will allow Curis to focus on seeking to develop later-stage preclinical compounds. We anticipate that by focusing on later-stage preclinical compounds, we may have greater opportunities to bring lead candidates to the next stage of development, which we believe will position Curis for growth moving forward. Earlier in 2006, Curis initiated new proprietary oncology programmes that are currently in mid-preclinical evaluation. We expect to provide further insight into these programmes in the near term."

In June 2003, Curis established a collaboration with Genentech for the continued development of Hedgehog pathway inhibitors. The focus of the collaboration is to identify lead clinical candidates for topical and systemic treatment of solid tumours. Numerous preclinical reports have linked abnormal activation of the Hedgehog pathway to the growth of several solid tumours, including basal cell carcinoma, pancreatic cancer, small cell lung cancer, prostate cancer, and others.