It's been about seven months since Structural Bioinformatics Inc. and GeneFormatics Inc. announced their intent to merge and about two months since the deal went through. To help fuel itself, the new company, Cengent Therapeutics Inc., signed a deal to provide X-ray crystallography services to AGY Therapeutics Inc.

Privately held Cengent, of San Diego, will supply its crystallography services to a target provided by AGY, of South San Francisco. Although financial terms of the deal were not disclosed, they include an up-front payment and potential milestone payments. For now, it's only X-ray crystallography, but the work could expand in the future, said David Muth, Cengent's president and chief operating officer.

"It's a proprietary target of theirs and we will crystallize it and solve it with a co-crystal," Muth told BioWorld Today. "While this initiative with AGY is just structure determination, we have the ability to rapidly accelerate the discovery process and generate leads for AGY. Once we are successful, there is the possibility to collaborate with AGY" on development.

AGY, for its part, focuses on using animal models and tissue culture models to analyze the mechanistic pathways of disease progression. It uses molecular snapshots in sequence at multiple times in the course of a disease to help understand genes involved in pathological processes. The company focuses on acute and chronic neurological diseases, as well as mental illness.

Cengent can provide services "that cover the waterfront" of structure determination, Muth said. Besides X-ray crystallography, it offers nuclear magnetic resonance (NMR) spectroscopy and augmented homology modeling - and the service deals it makes are part of Cengent's "hybrid business model."

The merger that formed Cengent had three drivers, Muth said: to broaden the range of services the combined company could offer, to enhance its drug discovery capabilities and to pool financial resources. At the time of the announcement, the blended cash reserve was enough to last the merged company more than three years. Now, about seven months later, that cash pile has fallen accordingly, enough for the next 2.5 years, Muth said, and service deals such as the one with AGY are imperative to its plan. (See BioWorld Today, Jan. 7, 2003.)

"These collaborations are integral to the strategy of the company," Muth said. "They do generate cash and offset burn rate. From a valuation standpoint, if someone is going to pay you for a service you provide, it assigns value."

Muth said the synergies between Structural Bioinformatics and GeneFormatics are mostly on the drug discovery side. The company is "incorporating the NMR program into the Genes to Leads program," which originally was a part of Structural Bioinformatics, he said.

Its lead program is PTP-1B, in preclinical work and aimed at a diabetes/obesity target. The company plans to partner the program, and although Muth acknowledged "it's hard to partner at preclinical, because you don't get value," he said the company should be able to because of strong mouse data. If not, Cengent will look to partner around the Phase I stage, and will be prepared for either scenario.

It also has programs for anthrax lethal factor and a Her-2 breast cancer program, both preclinical. Looking ahead, Muth, who was president and chief operating officer at Structural Bioinformatics before the merger, said the company needs to stay the course, to some degree.

"The biggest goal is to continue to integrate the two companies," he said. "And, we need to deliver on our operating plan, which is to generate funds [through service agreements]. And continue to advance our pipeline."