By Randall Osborne

West Coast Editor

With $100 million in third-party financing under way, Affymetrix Inc. formed a genomics subsidiary called Perlegen Sciences Inc. that aims to read 50 genomes for patterns of genetic variation useful in drug development.

"We're raising it right now," said Brad Margus, CEO of the new company, recruited earlier to work in genome scanning for Santa Clara, Calif.-based Affymetrix.

Perlegen will use Affymetrix's DNA scanning technology - which is cheaper than conventional methods and throws a wider net - for the task.

Having scanned the genomes, Perlegen will take aim at the entire genomes of specific patient populations provided by pharmaceutical partners, seeking to associate patterns and health factors.

The new company will become a major customer of Affymetrix, which retains an equity position in Perlegen as the new firm recruits more scientists, scales up the processing of biological samples, and builds a database system.

Specific details of the arrangement between the two companies were not disclosed, and the deal is subject to approval by Affymetrix's board.

Affymetrix's whole-wafer DNA array technology, to be used by Perlegen, beats traditional methods, Affymetrix said, which have involved sequencing by way of polymerase chain reaction and other gel-based methods, or performing enzymatic or mass spec-based assays on specific single nucleotide polymorphisms (SNPs). These work adequately when a small number of candidate genes or SNPs are on the table, but are not advanced enough to handle whole genome scans.

Completed data from human genome sequencing makes the enterprise possible, Margus said.

"That's what we're putting down on the wafers at first," he said, adding that "one person with wafers can do what a couple hundred sequencing machines can do. You take 50 additional genomes and throw them on the wafers, and then you see where they're identical and where they're different."

Microchip-based DNA scanning will let Perlegen examine whole genomes on a few chips, a project that could cost several hundred million dollars for 50 genomes using the old methods, but will be vastly cheaper with Affymetrix's technology.

"It's finally cost effective," Margus said. "It's hard to imagine doing it any other way."

He said identifying SNPs is "something a lot of people do, but we'll be finding the most of anybody," although SNPs comprise "just a byproduct," and the patterns of difference will be the most critical.

"If you have variations, you really want to get the pattern of variations - which ones travel together," Margus said.

Like the massively successful Celera Genomics, established in 1998 by PE Corp. (which also includes Foster City, Calif.-based PE Biosystems), Perlegen derives its name from a Latin root - "perlego," meaning "to scan, to examine all over, to survey thoroughly, or to read through."

Affymetrix is known for its GeneChip system: disposable DNA probe arrays containing gene sequences on a chip, reagents for use with the probe arrays, a scanner, and other instruments to process the probe arrays and software to analyze and manage genetic information. The firm's spotted array system lets individual researchers put together and analyze custom microarrays.

News of the new company was disclosed a day after Affymetrix said it plans to acquire Berkeley, Calif.-based computational genomics firm Neomorphic Inc., in a stock swap valued at $70 million. (See BioWorld Today, Oct. 3, 2000, p. 1.)

Perlegen will be located somewhere in Silicon Valley, Margus said.

"Through February, it will be using one of the buildings Affymetrix recently vacated," he said. "Internally, we already have 30 people who are [doing the company's work]."

Affymetrix's stock (NASDAQ:AFFX) closed Tuesday at $46.125, down 93.75 cents.

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