BioWorld International Correspondent

LONDON - Astex Technology Ltd. raised £23 million (US$38.9 million) through its acquisition of German genomics company MetaGen Pharmaceuticals GmbH with its £15 million cash, and by raising £8 million from existing investors.

The value of the all-share deal between the two privately held companies was not disclosed, but Tim Haines, CEO of Astex, told BioWorld International that the shareholders of MetaGen will own less than 25 percent of the merged company. Those are Schering AG, which spun out Berlin-based MetaGen as a wholly owned subsidiary in 1996, as well as Apax Partners and HypoVereinsbank, which took the company independent in March 2001 in a €44.6 million funding, making MetaGen the largest spin-out from a German pharmaceutical company.

Haines said, "Much of the cash in MetaGen is tied up in current programs, but £15 million net will come to Astex." The MetaGen facility in Berlin will be closed, with some of the 40-person staff expected to move to Astex's headquarters in Cambridge, UK.

The £8 million of new money from existing investors - Abingworth Management Ltd., Oxford Bioscience Partners, Advent International Corp., Alta Partners and GIMV - was not dependent on Astex's takeover of MetaGen.

"They were looking to support the company, and we are delighted by this reflection of their support in wanting to maintain their stake in Astex," Haines said. Previously, the five firms invested £28.4 million in Astex in two rounds in 2001.

Haines said, "This obviously gives us cash for a significant period of time. We don't see the IPO window opening up very quickly, but we want to be ready [for an IPO] with compounds in the clinic by the end of next year."

Astex's chairman, Peter Fellner, has been behind most of the consolidation in the UK biotech sector this year. He took over Oxford GlycoSciences plc just before he resigned as CEO of Celltech Group plc. As executive chairman of British Biotech plc, he merged that company with RiboTargets Holdings plc and Vernalis plc, under the Vernalis banner.

Haines said Astex and MetaGen first met two years ago, but the realization of the need for a merger came from MetaGen's shareholders.

"MetaGen has done very well and been very successful in target discovery and identification in oncology, but it is now recognized that it is not good enough just to have targets," Haines said. "MetaGen fits in very well with Astex, with our discovery programs with pharma companies and our early stage compounds, developed around a variety of targets."

Astex has an existing partnership with Schering that it says will be strengthened by the MetaGen takeover.

To date, Astex has used its structure-based drug discovery platform, which includes a high-throughput X-ray crystallography capability, to discover compounds against public domain targets in which the biology is well validated, but which have not been amenable to traditional high-throughput screening.

The value of that approach was demonstrated in March when Astex signed a $40 million deal with AstraZeneca plc, of London, to discover drugs against the well-known Alzheimer's disease target beta-amyloid precursor protein-cleaving enzyme, which mediates the deposition of amyloid plaque. Astex received its first milestone payment related to the deal in September.

The £23 million of new money will allow Astex to take its own compounds forward and to work on some of MetaGen's proprietary targets in the hope of greater returns. Haines said it was too early to comment on which of MetaGen's 1,000-odd targets would be taken forward.

"We have a novel way of coming up with lead compounds to targets where the biology is known but which have previously proved difficult to work with," Haines said. "In the future we will use proprietary targets from MetaGen to take more risk in return for greater reward."

Astex will take compounds to Phase II work before licensing them. "We increasingly see this is the point at which pharma wants to invest," Haines said.