By Matthew Willett

Elitra Pharmaceuticals Inc., in the midst of a quiet period related to its initial offering, agreed to acquire the Canadian gene-drug targeting company Mycota Biosciences Inc. in an all-stock transaction valued at about $19.34 million.

The acquisition of complementary technology seems the most appealing factor in Elitra's purchase of the Montreal company, founded in 1999 with antifungal technologies licensed from McGill University in Montreal.

The deal is valued at about $19.34 million using the share price of Elitra's last private placement, $3.25, in August. Mycota shareholders will receive 5,950,866 shares of Elitra stock in the transaction, giving them a stake of about 12 percent to 13 percent in Elitra, which had about 41 million shares outstanding before issuing new shares for Mycota.

The transaction is expected to close in November, subject to Canadian regulatory authorities and customary closing conditions. Elitra had about $11.27 million in cash and cash equivalents as of June 30. It registered for an initial public offering last month that is expected to bring in $86 million. (See BioWorld Today, Sept. 6, 2000.)

Mycota's proprietary methodology for identifying essential genes, Gene Replacement and Conditional Expression (GRACE), involves precise gene deletion and conditional expression. GRACE permits gene identification on a genome-wide scale, which allows for the identification of all drug targets for a pathogen.

Mycota has identified about 600 essential gene drug targets in Candida albicans, and Elitra, of San Diego, has itself identified about 800 different drug targets in seven species of bacteria.

Mycota's usefulness to Elitra can be easily surmised. "We're in the area of antimicrobials, both bacteria and fungi," Elitra Chief Financial Officer Alana McNulty said. "We're an antimicrobial functional genomics company that also discovers and develops antimicrobial drugs. We're very fast at both identifying essential genes and developing assays for high-throughput screening, and we're working in major bacterial and fungal pathogens."

Elitra uses shotgun antisense technology to identify essential genes, and the company entered a licensing agreement with Incyte Genomics Inc., of Palo Alto, Calif., for the PathoSeq database, which it uses to form a bioinformatics database for drug target selection.

The company has applied its drug discovery technologies to Staphylococcus aureus, Pseudomonas aeruginosa and Aspergillus fumigatus.

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