By Brady Huggett

Structural GenomiX Inc. got stronger computationally through the signing of a formal agreement to acquire Prospect Genomics Inc.

Financial terms of the merger between the privately held companies, expected to be completed in a few weeks, were not disclosed.

"We are really looking forward to integrating the two companies and making a first-class organization as a result," said Tim Harris, president and CEO of San Diego-based Structural GenomiX.

Although Prospect will become a piece of Structural GenomiX, it will do so from home.

"The plan is to stay here," said Richard Goold, president of San Francisco-based PGI. "We are the computational arm. The laboratory and crystallization will carry on down in San Diego."

"We will have a facility in San Francisco, called [Structural Genomics San Francisco]," said Linda Grais, founder and executive vice president of Structural GenomiX. "They will become a completely integrated part of SGX. For the past couple of months we have been working on this."

For Prospect, which has been in business about a year, weighing the pros and cons of being acquired boiled down to the pride associated with standing alone.

"We reviewed all the issues," Goold said. "The only one we had was, 'Can you deal with the loss of independence?' And we can. Two of our founders are on their [scientific advisory board]. We spent lots of hours with them, and we felt their corporate culture was a lot like ours."

And for a young company like Prospect, there is plenty of upside to the acquisition, Goold said.

"We gain the typical advantages," he said. "The science is very synergistic. We can stretch the envelope on what they are doing in the lab. They have infrastructure in place and they have already done the financings. So we avoid that, which is nice."

Structural GenomiX has hit the financing trail in the two years since its start in April 1999. The company has raised $85 million to date, Grais said, and is concentrating on value creation right now.

Prospect develops computational technologies for translating genomic information into drug discovery and development. It has a suite of structure determination programs and an exclusive license to a database of 3-dimensional protein structure models from Rockefeller University, of New York. It also develops virtual chemical libraries and high-throughput computational methods for screening chemical libraries against protein structures. This is the technology that interested Structural GenomiX.

"They want us to continue building protein structure," Goold said. "They also want us to continue the exploration of small-molecule docking with protein structures. The idea here is we would make very large virtual models of chemicals on the computer and screen them against the protein structures that are in our database."

Goold said Harris had a "pretty clear road map into the future" that he revealed to Goold, and it was a big part of what persuaded Prospect to OK the acquisition. It always has been part of the company's business plan to develop capabilities in the computational structural biology field, Grais said, and in this case it made the most sense to do it through acquisition.

Structural GenomiX recently signed a $13 million, five-year collaboration with the Cystic Fibrosis Foundation to define the 3-dimensional structure of cystic fibrosis transmembrane regulator, a gene that can cause cystic fibrosis when defective. While Goold said he was sure the new arm will work on that collaboration, Grais said it was what Prospect offered overall that made the acquisition attractive. (See BioWorld Today, Feb. 9, 2001.)

"It's really that we wanted to obtain computational capabilities across the board and thought PGI brought that to the table," she said. "PGI brings state-of-the-art, world-class capabilities in computational tools. Together we create the dream team of drug discovery." n

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