OTTAWA, Ontario ¿ With genomics being a hot topic with investors at the present time, Montreal-based company SignalGene Inc. is competing for some of that recognition as it continues to position itself as one of Canada¿s leading genomics firms.

In a share exchange transaction valued at C$12.7M (US$8.7 million), it plans to acquire all of the outstanding shares of GeneScape Inc., a private Toronto-based functional genomics company.

The planned acquisition complements SignalGene¿s current genomics technology portfolio since it provides access to a platform for identification and validation of differentially expressed messages. According to Michael Dennis, president & CEO of SignalGene, ¿Our established genetics-based technologies for positional cloning and allele association focus on identifying changes in gene sequence that are the root causes of disease and toxic drug responses. The GeneScape platform will expand these capabilities by permitting the analysis of even the smallest changes in gene expression that occur in disease tissue or following drug treatment. This will significantly enhance our ability to discover and validate novel disease markers and drug targets in our ongoing research programs, and increase the value of our technology portfolio for strategic alliances with pharmaceutical partners.¿

GeneScape¿s technology platform is powered by STAR (Subtractive Transcription-based Amplification of mRNA), which is covered by a first-of-type issued U.S. patent, No. 5,712,127, issued in January 1998. The technology was developed especially for the analysis of differentially expressed rare mRNA sequences.

In contrast to other subtractive methodologies, STAR uses DNA¿s efficiency in forming double-stranded material to eliminate sequences, not discover them. The differentially expressed messages isolated by STAR can then be further screened using other technologies proprietary to the company. For example, its MACS (MacroArrays for Clinical Screening) identifies specific genes that are markers of the disease process or drug response, and FAST (Facilitated Antisense Sequence Tags) permits accelerated validation of potential drug targets by blocking specific gene activity in living cells.

Following the acquisition, slated to close around March 20, GeneScape¿s scientific activities will be integrated into SignalGene¿s Montreal operations, leading to the creation of at least 10 high-technology positions at SignalGene over the next year, Denis said.

GeneScape co-founder and chief scientific officer Lawrence Malek, who is also the principal inventor of its technologies, will join the management team of SignalGene as vice president, target discovery. The current CEO of GeneScape, Bradley Thompson, will join SignalGene¿s board of directors, subject to approval by regulatory authorities. Thompson was previously co-founder, chairman and CEO of Synsorb Biotech Inc., a Canadian biopharmaceutical company that trades on the Toronto and Nasdaq exchanges. Thompson recently co-founded Oncolytics Biotech Inc., a Calgary-based cancer therapeutic company, where he holds the positions of chairman, president and CEO.

In conjunction with the acquisition, the deal includes a private placement totaling C$2.7M by two of GeneScape¿s current shareholders, the Business Development Bank of Canada and Royal Bank Venture Inc., both of Toronto. An additional C$1M will be invested directly into SignalGene by Societe Innovatech du Grand Montreal on closing of the proposed acquisition. SignalGene will then issue approximately 7.16 million new shares under these transactions at a price of C$1.914 per share.

SignalGene¿s activities have certainly found favor with investors, as its share price on the Toronto Stock Exchange has risen from C$0.69 on January 26 to a March 3 close of C$5.25.