West Coast Editor

In a bid to fuse diagnostics with pharmacogenomics, Clinical Data Inc. is taking over Genaissance Pharmaceuticals Inc. in an all-stock deal valued at about $56 million.

New Haven, Conn.-based Genaissance's stock (NASDAQ:GNSC) rose 10 cents Tuesday, or 9.4 percent, closing at $1.16.

"Clinical Data understands the marketplace and the approvals process, and that's a key thing for us at this point," Kevin Rakin, president and CEO of Genaissance, told BioWorld Today. "And by putting the companies together, we have greater heft and substance."

Legal concerns caused Rakin to limit his remarks pending the filing of a proxy statement related to the deal, he said. Newton, Mass.-based Clinical Data offers blood chemistry instruments and diagnostic assays to clinics and small hospitals. The combined firm would sell pharmacogenomics services to pharmaceutical, biotech and agricultural markets.

Under the terms of the merger, unanimously approved by both boards, Genaissance stockholders would get, at a fixed exchange ratio, 0.065 shares of Clinical Data common stock for each share of Genaissance common stock. Based on the two firms' closing prices Monday, the amount represents a price of $1.33 per share of Genaissance's common stock.

Genaissance's preferred shareholders would exchange their shares for Clinical Data preferred shares, and when the deal closes - which is expected to happen in the fourth quarter - Genaissance's common and preferred shareholders would own about 40 percent of the combined company.

With two molecular diagnostic tests on the market, Genaissance has work ongoing in the areas of central nervous system disorders and cardiovascular disease. Last fall, the firm acquired an exclusive worldwide license from Merck KGaA, of Darmstadt, Germany, to develop and commercialize the Phase II small-molecule vilazodone, a selective serotonin reuptake inhibitor and a 5HT1A partial agonist for depression. (See BioWorld Today, Sept. 24, 2004.)

That deal provided Genaissance with a lead compound, and the company said it would know within two years whether it can move vilazodone into Phase III trials. The compound operates by way of a different mechanism of action than other drugs for depression and anxiety. Genaissance said a pharmacogenomic-based compound would do better for patients than available treatments, which provide initial relief of depression only in about 50 percent of those dosed, the firm noted.

Genaissance's overall strategy involves in-licensing drug candidates, a la the Merck compound, and then finding genetic markers to identify a responsive patient population.

"We're developing next-generation diagnostics and theranostics,'" Rakin said. "That's the main strategic goal here, and all of our research and development efforts fall under that umbrella."

The firm's broad-ranging investigations include the finding late last year of genetic markers that might predict whether schizophrenics under treatment are at risk of developing clozapine-induced agranulocytosis. Data from the study might apply to other drugs that affect white blood cell counts and require frequent blood testing, Genaissance said.

Genaissance board members Rakin and Joseph Klein will join Clinical Data's board, along with Burton Sobel, professor of biochemistry at the University of Vermont, bringing the total number of board members to seven.