By Brady Huggett

Sangamo BioSciences Inc. has been granted an option to acquire Gendaq Ltd., a UK-based company also using zinc finger DNA-binding proteins to regulate gene expression, in a move designed to strengthen Sangamo¿s position in the area.

Through the agreement, Sangamo has an option to purchase all the outstanding stock of Gendaq and to assume all employee stock options. Sangamo would give up 2.25 million shares, or about 10 percent of the company, in the proposed deal. Based on Sangamo¿s closing price of $17.62 Tuesday, the potential acquisition is worth about $39.6 million.

Sangamo¿s stock (NASDAQ:SGMO) fell $2.39 Wednesday to close at $15.23. It had about $63.9 million in cash, cash equivalents and investments as of March 31.

Sangamo CEO and President Edward Lanphier said what Gendaq has accomplished is ¿precisely what we have done.¿

¿[Gendaq¿s] scientific and business mission is very similar to Sangamo¿s,¿ Lanphier said. ¿Gendaq was the only other company pursuing this area. It was an opportunity for us to create an industry-leading position in this field and consolidate the technology in this field.¿

Sangamo, of Richmond, Calif., has until July 14 to contemplate the acquisition. Lanphier said the decision would be made on or before that date. But so far, Sangamo likes what it has seen.

¿We have done our initial diligence and we are very impressed with what they have accomplished and the outfit they have built,¿ he said. ¿We are in the process of completing our due diligence ¿ this is our confirmation diligence.¿

If and when the deal goes through, Sangamo will take in Gendaq¿s 16 scientists, 24 patent applications and $6 million in cash. London-based, privately held Gendaq raised about $9.5 million in an equity round in April. The company was founded in part by Aaron Klug, a Nobel Prize winner for chemistry and another reason Lanphier said Sangamo is eyeing Gendaq.

Lanphier said the current plan, if the acquisition is completed, is to continue operations at Gendaq. There won¿t be a big move across the ocean or a letting go of Gendaq¿s employees.

Sangamo was founded in 1995 and has about 80 employees now. Like Gendaq, it focuses on zinc finger DNA-binding proteins.

¿We¿ve used that platform to turn on or off endogenous genes, and we¿ve done it to human genes, mouse, rat, plant genes, yeast and Drosophila genes as well as viral sequences. It¿s a very robust and broad technology.¿

Sangamo¿s Universal Gene Recognition technology is used to engineer zinc finger DNA-binding proteins, constructing them in such a way that they can recognize specific genes. The technology can create the zinc finger proteins so they control gene expression, and therefore, cell function. Sangamo has formed 23 collaborations around the technology with pharmaceutical and biotechnology companies in the genomics field.

Sangamo has filed 30 patent applications and in-licensed another 10. By negotiating the option for Gendaq, Sangamo is getting a chance to pick up similar technology as well as pick off a potential competitor.

¿Their area of focus and expertise is very synergistic to what we are doing,¿ Lanphier said. ¿The areas where they have done the most significant work is in the structural work ¿ the actual DNA binding elements. That is additive to what we have done.

¿Gendaq was certainly making a run at this, but Sangamo really dominates this space,¿ he added. ¿[Sangamo] has caused others that want to get in this area difficulty in raising money and making a run at this.¿

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