By Kim Coghill

Washington Editor

Enchira Biotechnology Corp. raised $12.8 million in a private financing to further develop its Directed Evolution technology gene-shuffling platform for applications in the life sciences and industrial enzyme industries.

The Woodlands, Texas-based company's technology is called RACHITT (random chimeragenesis on transient templates) and allows researchers to build extensive libraries of hybrid genes with diverse properties for commercial and academic partners.

According to Enchira, these novel genes can be used for a broad range of applications, such as protein-based pharmaceuticals, agricultural crop enhancement and protection products, and industrial enzymes for manufacture of specialty chemicals, fine chemicals and pharmaceutical intermediates.

The idea is to create hybrid genes that code for proteins with desired characteristics.

The private financing consisted of shares of common stock and warrants to purchase shares of common stock. The round was led by OrbiMed Advisors LLC and included Oracle Investment Management and Zesiger Capital Group LLC.

The company's shares (NASDAQ:ENBC) closed Tuesday at $7.19.

When the deal is complete, Enchira's total cash level will be $15.5 million, according to Paul Brown III, chief financial officer. The company posted a net loss of $2.5 million in the first six months of 2000.

The funding will benefit the gene shuffling technology through additional sales, marketing, staff and licensing, Brown said.

Formerly known as Energy BioSystems Corp., Enchira incorporated in 1989 under the former name and went public in 1993. In June, the company changed its name to Enchira.

Earlier this year Enchira entered a licensing agreement with Genencor International for research and development work on RACHITT. Under terms of the agreement, Genencor will provide Enchira $1 million in funding during the next two years. The contract with Palo Alto, Calif.-based Genencor is the first commercial license contract Enchira has signed.

The company's focus on gene shuffling has caught the attention of Redwood City, Calif.-based Maxygen Inc., whose similar core technology uses directed molecular evolution to create new genes. In April, Maxygen initiated arbitration proceedings with Enchira, alleging that Enchira breached confidentiality provisions and other terms of a development and licensing agreement the companies entered in December 1997.

Enchira disputes the allegations contained in Maxygen's request for arbitration and said it is confident that the allegations are without merit. Brown said the arbitration is "ongoing."

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