By Jim Shrine

Special To BioWorld Today

An $11.5 million second round of financing secured by Deltagen Inc. is expected to buy the company time to generate biological target leads from its proprietary mouse gene knockout technology.

"We probably know the existence of 80,000 to 100,000 genes in humans," said Bill Matthews, president and CEO of San Carlos, Calif.-based Deltagen. "The missing step is defining which of those genes are going to act or serve as targets for new drugs."

Deltagen, founded in 1997 by two former scientists of South San Francisco-based Genentech Inc., plans to use its mouse technology to produce functional information on genes, then license, sell or co-develop products based on the in vivo discoveries. While those leads are being developed and targets validated, the firm will use its technology to help other companies define their targets. Deltagen said it can produce gene knockout mice in 31 weeks, rather than the year it traditionally takes.

Additional technology being incorporated into the process is expected to speed the process even further, Matthews said.

"The key aspect of validating these biological targets is we're able to use in vivo information," Matthews said. "Essentially, in the mouse knockout system, we're able to analyze the function of a gene in all organisms simultaneously."

Matthews declined to disclose the technology behind the techniques for producing rapid knockout mice, but said the company is "able to move from 300 base pairs of an expressed sequence tag to targeting vectors in a rapid time frame. That's the essence of the technology."

Deltagen has more than 250 gene knockouts under development internally. In 2002, that number will likely jump to between 2,500 and 3,000, Matthews said.

Matthews and Deltagen's other co-founder, chief scientific officer Mark Moore, each spent about five years at Genentech. There, Matthews established the program in stem cell biology, while Moore established and ran the gene knockout program. Robert Klein, Deltagen's director of molecular biology, also came from Genentech, where he developed the functional genomics program. Deltagen and Genentech have a "very cordial" relationship, Matthews said.

The company is "not about producing knockout mice," he added. "We're about producing functional information on genes. We use the mice as a tool to tell us the function of genes. The intellectual property around the function of genes is the crucial aspect of this company."

Attempting to bridge the gap between determining gene sequence and understanding in vivo function, Deltagen said that, although such information cannot be obtained from in vitro cell-based assays, in vivo information will provide well-characterized targets that will speed product development. The Deltagen technology allows for the assessment of hundreds of genes per year.

Programs at the company are focused on determining novel gene function in the areas of immune response, inflammation, hematopoiesis and angiogenesis, and in the area of the central nervous system. Initial leads should be available to the pharmaceutical community around August 1999, Matthews said.

He said some collaborations, in addition to ongoing work with Tularik Inc., a South San Francisco company developing small molecule therapeutics, already have been established and are expected to be disclosed soon.

The latest round brings total venture financing to $14.5 million. The financing was led by the Sprout Group, of Menlo Park, Calif., the venture capital affiliate of New York-based Donaldson, Lufkin & Jenrette Inc. Also investing were Baccharis Capital, also of Menlo Park, which had provided the seed financing; and Tularik. *