BioWorld International Correspondent

The Genetics Company AG, of Schlieren, Switzerland, raised CHF5 million (US$3.7 million) in new funding to finance the purchase of a set of assets from CallistoGen AG, of Berlin, including computational chemistry and virtual screening tools, in vitro validation tools and a collection of small-molecule lead candidates for Alzheimer's disease.

Terms of the transaction were not disclosed, but the purchase price did not account for all of the new funding. Part of the cash will be used for further development of the acquired technologies and programs. "It's no secret [CallistoGen] has been in serious financial trouble. It was basically the right time to step in and buy whatever we could get," the Genetics Company CEO Harald Eistetter told BioWorld International. "It was a very attractive deal for us."

Existing investors Nextech Venture, of Zurich, and Novartis Venture Fund, of Basel, participated in the latest financing, boosting the Genetics Company's total funding to CHF15.5 million. The firm aims to attract more cash by August. "We want to raise an additional CHF12 million," Eistetter said.

The Genetics Company was established in 1998 as a spin-out from the University of Zurich and from the Swiss Institute for Experimental Cancer Research in Epalinges. Up to now, Eistetter said, it had operated as a functional genomics company, focused on finding novel targets in Drosophila and mouse models of disease and in human cell lines. It did not have any in-house chemistry expertise. The new assets represent a first step in the "forward integration" of the company, he said, by adding a drug discovery and development platform to its existing set of skills.

Five former CallistoGen employees have joined the Swiss firm, including its former CEO, Dietmar Gundel, now vice president for corporate and business development. The firm wants to build additional medicinal chemistry capabilities, Eistetter said. It will hire more staff later this year, and it also is open to additional acquisition opportunities.

The company also is looking to outlicense its Type II diabetes program, comprising a model of the disease in Drosophila. Its main therapeutic focus is now on cancer and neurodegenerative disease. The Alzheimer's drug candidates it acquired from CallistoGen target beta-site amyloid precursor protein-cleaving enzyme (BACE), one of the key enzymes involved in the formation of the beta amyloid plaques characteristic of the disease.

"There are only five companies worldwide that have ever been able to synthesize small-molecule inhibitors of BACE," Eistetter said. "Our compounds are active at very interesting low micromolar concentrations in cellular assays." They already have started to attract interest from potential partners, he said, although clinical trials are still several years away. "We want to enter clinical trials either on our own or with a partner by 2006," Eistetter said.

The company's lead cancer project is in the area of colorectal cancer. The company has identified two downstream components of the WNT signal transduction pathway, which plays an important regulatory role in embryonic development. "Eighty-five percent of all people having colon cancer have an overactive WNT pathway," Eistetter said.

The company aims to move this program into the clinic by 2005.