By Lisa Seachrist

Vancouver, British Columbia-based TerraGen Diversity Inc. will buy combinatorial biosynthesis specialist ChromaXome Corp. in a deal worth $6.5 million.

ChromaXome, a wholly owned subsidiary of Trega BioSciences Inc., of San Diego, has recently been granted two broad-process patents for generating and screening complex organic molecules for biological activity. TerraGen will obtain those patents in the sale.

¿There are two very attractive aspects of the deal for us,¿ said Mario Thomas, president and CEO of privately held TerraGen. ¿The intellectual property they have will give us a leadership position in combinatorial biosynthesis. In addition, they have developed some very interesting molecular biology tools, including vectors and surrogate hosts.¿

Following shareholder approval, TerraGen will pay Trega $5 million cash over the next 16 months. In addition, Trega, formerly known as Houghten Pharmaceuticals, will receive 600,000 shares of TerraGen preferred stock at the closing of the deal.

¿We are changing our business model from a service company to one that is capable of creating a steady stream of lead compounds for drug discovery,¿ Thomas said. ¿This acquisition is the first step toward developing a strong intellectual-property estate. Next, we will work on extending our capabilities in order to establish high-value pharmaceutical partnerships.¿

TerraGen currently has a strategic relationship with Schering-Plough Corp., of Madison, N.J., and has four potential pharmaceutical partners waiting in the wings with ongoing feasibility studies.

For its part, Trega said the decision to part with ChromaXome was a means of focusing on its combinatorial chemistry efforts as well as its selection/profiling technologies and melanocortin biology.

Combinatorial biosynthesis relies on the evolutionary, established ability of microorganisms to produce biologically active small molecules. Unlike combinatorial chemistry, in which man-made scaffolds are modified to create small-molecule drugs, combinatorial biosynthesis has at its disposal an infinite number of scaffolds created by nature.

Unfortunately, most microorganisms can¿t be cultivated in the laboratory. ChromaXome¿s technology allows scientists to insert the genome of microorganisms that can¿t be cultivated in the lab into microorganisms that are commonly used as research vehicles. The technology allows the resulting small molecules expressed to be analyzed for biological activity.

¿Because all of these molecules being generated are coming from microorganisms, they are by definition biologically active,¿ Thomas said.

TerraGen will use ChromaXome¿s technology to enhance its internal program in anti-infectives, and expects to generate small molecules as lead compounds for a wide variety of programs partnered with pharmaceutical companies.

Trega¿s stock (NASDAQ:TRGA) closed Monday at $1.875, down $0.187. n