By Mary Welch

Orchid Biocomputer Inc. raised $72 million in what is being called the biotech industry's largest private placement, and then purchased with stock GeneScreen Inc., a company that performs genetic diversity analysis services.

"We were looking for $24 [million] to $54 million but I think we marketed the placement well and broadly," said Dale Pfost, Orchid's president and CEO. "The money just flooded in. It is the largest private placement in the industry either managed by third parties or self-managed, which was the case here. Until us, the largest private placement was in 1991, with British Biotech, which was also in the $70 million range. A lot of things went right."

Pfost said the placement will be sufficient for Orchid's needs in the foreseeable future. "This will provide us with what we need, but maybe not what we'll want. So we are considering an IPO [initial public offering]."

Among the reasons for the placement's success, he said, is the company's positioning in the "post genomic area. Pharmacogenomics is where the industry is headed and we're taking the leading position in this area."

The placement involved slightly more than half of the company's equity. The two largest investors were OrbiMed Advisors LLC, of New York, and new investor Oracle Strategic Partners, also of New York. New investors included Affymetrix Inc., of Santa Clara, Calif.; AP Asset Management; International BioMedicine Holdings, of San Francisco; Burrill AgBio Capital Fund LP, of San Francisco; and the Taiwan Investment Group. Existing investors who also participated include Oxford BioScience Partners, of Westport, Conn.; INVESCO Funds Group, of Denver; and WPG Farber Present Fund LP, of New York.

Affymetrix served as the lead corporate investor. Last month Affymetrix and Orchid teamed up to develop and commercialize single nucleotide polymorphism (SNP) genotyping assays using Orchid's Genetic Bit Analysis (GBA) primer extension technology with a new GeneChip array product from Affymetrix. These new assays will allow researchers to customize high-density SNP analyses solely by designing GBA primers for use on a standard GeneChip array.

"We produce the kits that put the SNPs on Affymetrix chips - and other platforms as well," Pfost said. "Our strategy is to establish leadership in the genetic diversity market with our GBA SNP analysis technology. In the near term, we are driving profitability by offering our own pharmacogenetic products and services. We also offer GBA as a proprietary assay by porting it in the form of proprietary kits, which is what we did with Affymetrix. Overall, we are creating intellectual property to tap into value-added SNPs and the creation of proprietary label extensions. This placement will allow us to continue building our commercial base to expand the application of our SNP technology within the pharmacogenetics and genetic diversity markets."

As part of this effort, the Princeton, N.J., company acquired Dallas-based GeneScreen, which performs more than 1.5 million analyses of DNA yearly, including SNPs, for a variety of applications. It is the country's second largest provider of paternity testing, Orchid said, and its business includes doing genetic diversity analyses for forensic and identity testing and for improved transplantation of organs and bone marrow. Orchid will retain all of GeneScreen's businesses and facilities in Dallas; Dayton, Ohio; and Sacramento, Calif. GeneScreen will operate as a business unit of Orchid.

"The numbers of patient samples tested and the clinical-grade quality of the results at GeneScreen are second to none," Pfost said. "With GeneScreen, we have a well-established company to provide us genetic diversity analysis."

In 1998, privately held GeneScreen's revenues were more than $13 million. It began operations in 1987. Specific terms of the acquisition were not disclosed.