HAMBURG, Germany ¿ Munich-based German drug discovery research company Morphochem AG has acquired U.S.-based Small Molecule Therapeutics Inc. (SMT) in a triangle reverse merger. SMT will become a fully owned subsidiary, Morphochem Inc.

Morphochem acquired 100 percent of the shares of Princeton, N.J.-based SMT for cash and Morphochem stocks. After the transaction, SMT¿s leading shareholders, Domain Associates, Mayfield, and 3i Group, hold 8 percent of Morphochem. The deal was led by Morphochem¿s lead investor TVM, of Munich and Boston, and was completed within three months.

Jim Blair, CEO of Domain Associates, said: ¿While some progress was made at SMT, it became increasingly apparent that there was a need to integrate both biology and chemistry.¿ SMT¿s investors were attracted by the idea of combining SMT¿s technology with Morphochem¿s multi-component chemistry to build what Blair called ¿a global drug discovery powerhouse.¿ Morphochem¿s main investor, TVM, had urged the company to quickly internationalize its business strategies and become a fully integrated drug discovery company.

¿SMT has established an excellent biology that complements our chemistry,¿ Thomas Loeser, Morphochem CFO, told BioWorld International. ¿Through the acquisition, we have established a U.S. base in a very short time and we have been able to add to our group a very experienced team of biologists. To find such people one by one would have cost months or even years. During the last quarter, there was an excellent opportunity window for a U.S. acquisition.¿

Morphochem focuses on ¿evolutionary chemistry,¿ the discovery and engineering of small-molecule drugs by integrating novel combinatorial chemistry methods. Compounds are produced by high-speed parallel synthesis combining a variety of chemical backbones and substituents so that classes of almost any pharmaceutical-useful compound families can be synthesized. During a screening process against enzymes, receptors, and other targets, proprietary software and hardware tools analyze the structure and biological activity of the novel compounds. The information is fed back into the system immediately so that up to 10,000 optimized compounds can be produced per day.

SMT has created a set of proprietary biological screening assays to screen drug targets against chemical compound libraries. ¿For example, SMT is able to express certain targets in E. coli and build assays from this,¿ said Morphochem CEO Wolfgang Richter. ¿These cell-based assays can be used for therapeutically validated or protein-protein interaction drug targets to find inhibitors and activators of protein-protein interactions. This is particularly useful, as many such protein interaction targets are identified by functional genomics currently.¿ SMT already has succeeded in finding protein-protein interaction inhibitors, among them antibacterial targets.

Richter added that Morphochem now has a portfolio of more than 60 screening assays. ¿Soon we will be able to develop compounds from target to lead to the clinical stage, and we can even add a pharmacological profile.¿ Morphochem provides its technology to pharmaceutical partners, but uses the technology for the in-house development of drugs against infectious diseases and cancer, too.

Morphochem was founded in 1996 and raised nearly DM40 million in two financing rounds (see BioWorld International, Sept. 8, 1999). The new entity will have 60 employees.

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