BioWorld International Correspondent

LONDON - Start-up Diversys Ltd. entered a US$10 million collaboration with Peptech Ltd. and secured a further $10 million in funding from Peptech and its original investor, MVM Ltd.

Under the three-year research agreement, Diversys will develop antibody candidates against four Peptech targets, receiving a guaranteed $10 million, plus royalties on any product sales. Peptech, based in Sydney, Australia, also is investing $7 million for a third of Diversys' equity, while MVM, based in London, has invested a further $3 million, giving it a third of the company. This round of investment values Diversys, based in Cambridge, UK, at $51 million.

CEO Bob Connelly told BioWorld International, "We only started the company at the end of last year. Getting a deal this size will allow us to dramatically expand the growth of the company, both in terms of R&D and commercial development."

"At this stage, I would have expected to be spending a lot of time visiting venture capitalists and banks; now I can work on building Diversys and doing deals. This is gaining us one to two years."

Diversys was spun out from the UK Medical Research Council's (MRC) Laboratory of Molecular Biology (LMB) in December to develop platform technologies in antibody and protein engineering. It co-owns rights to the Winter II antibody patents, currently the subject of patent litigation between Cambridge Antibody Technology Group plc (CAT) and MorphoSys GmbH, of Munich, Germany. Diversys has sole rights to one element of the Winter II patent, covering single-domain antibodies, and will be developing such entities for Peptech.

Single-domain antibodies are less than 10 percent of the size of classical antibodies, and are expected to bind within protein cavities and to penetrate tissues more readily. Connelly said that only one of the four Peptech targets has been identified to date and "there are aspects that make it very suitable for binding to single-domain antibodies."

Diversys, which was set up by Ian Tomlinson and Greg Winter of the LMB, also has exclusive rights to a number of other MRC patents on antibody libraries and array technologies. The seed funding came from MVM, the venture capital arm of the MRC. As well as developing therapeutics, the company intends to build platform technologies in areas including diagnostics, bioremediation and proteomics.

When CAT took the rights to the Winter II patent it excluded single-domain antibodies, as their small size meant they were perceived as too difficult to work with. The difficulties of manipulating these small entities have been overcome and the Peptech deal gives Diversys the opportunity to show they have the same utility as other formats.

"Apart from giving us financial strength, the Peptech deal is an important validation of single-domain technology," Connelly said.

Diversys is currently looking for laboratories in Cambridge, where it will conduct its R&D, but it plans to open a headquarters office in Boston later this year.

"For a company like ours based on a technology platform and doing deals around that, the U.S. market is the biggest," Connelly said. "We will keep R&D in Cambridge, and take technologies that are ready to be applied and set them up in the U.S."

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