HAMBURG, Germany - The German biotech industry is experiencing a phase of rapid growth and consolidation. After a wave of foreign company acquisitions, two German biotech companies have merged in the first such union.

DeveloGen AG, of Berlin, will incorporate HepaVec AG, of Gvttingen, to create a company developing lifestyle disease therapeutics based on developmental biology. The merged company, which will keep the DeveloGen name, combines DeveloGen's gene discovery and functional genomics strengths and HepaVec's proprietary gene delivery technology.

Herbert Stadler, who founded and headed both companies, told BioWorld International he had thought about merging the two companies since the beginning of last year. "The plan was supported by our scientists; however, during that time we were turned down by one of our former lead investors." With TVM as a new lead investor, the plan was quickly executed.

HepaVec was founded in 1996 as a company focusing on gene therapy strategies to fight liver diseases, while DeveloGen was created in 1998 by several well-known German developmental biology specialists to commercialize their functional genomic and gene discovery expertise.

"The merger will create a lot of synergies," Stadler said. "For example, HepaVec has established very valuable tools we can use for DeveloGen's therapeutic strategies. And we can use HepaVec's vectors for DeveloGen's regenerative gene therapy purposes. We want to treat diabetes by delivering developmental genes into adult stem cells of the pancreas in vivo, where they should trigger the specific developmental cascades to regenerate beta-cells of the pancreas. Both companies already have cooperated in the development of such vectors.

"In addition, we will create a new liver therapy project to identify and deliver developmental control genes of the liver to start the regeneration of liver tissue to treat certain diseases."

Stadler added that the focus of the new entity would be on lifestyle diseases, such as diabetes, obesity and liver regeneration. "Together we will have a substantial critical mass in both financial and scientific terms. We will be able to offer a more complete product to potential partners and to create a wider, deeper portfolio. By the end of the year, a first product using modified adenovirus vectors to treat hepatocellular carcinoma will be in Phase I/II clinical trials."

Both companies have been founded with a substantial amount of money. DeveloGen was started with a record DM15 million (US$6.9 million), and HepaVec only last week completed a DM8 million financing round. (See BioWorld International, May 10, 2000.)

"So we believe we are well financed for the next two years," Stadler said. "And we hope to be able to go public on Neuer Markt then without an additional financing round." He said the company had an estimated value of about DM100 million now, more than the sum of the separate companies.

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