By Karen Pihl-Carey

Through a $32.5 million private financing, CuraGen Corp. has formed a majority-owned subsidiary to develop technologies for drug discovery, preclinical development and pharmacogenetics, while the parent company focuses on its own product pipeline.

Investors such as Soros Fund Management LLC and Cooper Hill Partners LLC, both of New York, participated in the private placement to fund the launch of 454 Corp. The new company's name refers to an internal code word at CuraGen that represents a breakthrough product.

"What we wanted to do is have a company or subsidiary that could continue to develop technology to understand genomes, while CuraGen could focus on leveraging that technology, and CuraGen stockholders could have the best of both worlds," said Jonathan Rothberg, founder, chairman and CEO of CuraGen.

The company's stock (NASDAQ:CRGN) closed Tuesday at $39.875, up $3.375.

The subsidiary will create and develop technologies designed to capitalize on the human gene sequence data generated by the Human Genome Project, Rothberg said. Existing genomic and proteomic technologies are limited because they analyze only one gene at a time. The technology 454 is developing has the potential to overcome this problem by analyzing all genes that comprise a genome in a panoramic, massively parallel fashion, he said.

"Obviously, we're excited because CuraGen is incredibly well-positioned now to make breakthrough drugs," Rothberg told BioWorld Today.

He would not say what percentage of the new company CuraGen will own, only that CuraGen holds a majority stake. The formation of 454 will allow the subsidiary to take advantage of new opportunities, "to take quantum leaps," Rothberg said, while CuraGen continues leveraging its current functional genomic technologies and advancing its discovery and development programs for products to treat obesity and diabetes, cancer, autoimmune diseases and psychiatric disorders.

"This is the time to start leveraging that genome and turning it into products," he said. "We have over $220 million in the bank. We have over 300 people, and we want to focus on the development of those products."

He believes the technologies that come out of 454 will become pervasive not just in health care, but in agriculture and other industries as well.

Within the coming months, CuraGen expects to appoint a CEO and elect a board of directors for 454, which currently is located at CuraGen's headquarters in New Haven, Conn.

In February, CuraGen completed the first protein interaction map of an entire genome, that of the yeast organism, causing its stock to shoot up 24 percent. Rothberg said the map was a clear commercial opportunity because yeast genes are involved in cell division, and it's the bad cell division that leads to cancer. (See BioWorld Today, Feb. 11, 2000, p. 1.)

CuraGen has several collaborations under way, one with Biogen Inc., of Cambridge, Mass., aimed at identifying therapeutic proteins and disease targets, and another with Genentech Inc., of South San Francisco, covering a range of disease programs.

In December, the company formed a five-year alliance with Abgenix Inc., of Fremont, Calif., to use genomics technologies to identify up to 120 fully human antibody drug candidates to fight cancer, autoimmune disorders and other illnesses. (See BioWorld Today, Dec. 10, 1999, p. 1.)

The company also has collaborations with COR Therapeutics Inc., of South San Francisco, and Hoffmann-La Roche Inc., of Nutley, N.J., among other companies.

CuraGen's gene discovery technologies include SeqCalling, a sequence database product, and GeneCalling, which gives a quick expression analysis of almost all genes associated with diseases and drug responses. Its high-throughput PathCalling technology is used to identify and understand proteins on a genome-wide scale.