HAMBURG, Germany - Functional genomics company Artemis Pharmaceuticals GmbH has been launched in Germany after completion of an initial financing round.

The first announcements of the founding attracted considerable attention last year. The scientific founders are two top-ranking German developmental biology researchers: Nobel Prize winner Christiane Nüsslein-Volhard, of the Max Planck Institute for Developmental Biology, in Tübingen, and Klaus Rajewsky, director of the Institute for Genetics at the University of Cologne. They joined forces with Peter Stadler, until then head of pharmaceutical biotechnology for Bayer AG, of Leverkusen, and George Scangos, president of Exelixis Pharmaceuticals Inc., of San Francisco. Exelixis will hold a minority stake in Artemis. Both companies have agreed upon a close collaboration.

Stadler, Artemis' CEO, managed the complicated legal and financial procedures over a nine-month period. “We have had a tremendous backing from a number of important sources - state, financial and legal,“ he said. “So, we have been able not only to ink all agreements, but to recruit an outstanding group of scientists and to make significant progress in growing the company.“

Meanwhile, Artemis moved into a 1,700-square-meter facility in Cologne and set up a temporary laboratory in Tübingen. The 700-square-meter Tübingen building is expected to be ready next year. “I am happy that all authorizing procedures have been carried out smoothly . . . and without any political obstacles,“ Stadler said. “This is an important signal.“ Artemis employs a team of 25 scientists and expects to grow to 35 to 40 by the end of this year.

The company will try to identify disease targets in degenerative diseases (e.g., arthritis, Alzheimer's disease, cancer and diabetes) and will use zebrafish (Danio rerio) as a model organism for large-scale genetic screens. “These tiny little fish are very relevant to human pathology,“ Stadler explained, “as they have 75 percent homology with human genes. They may not be a phenotypic model system, but they will help us to understand the biochemical pathways which show considerable similarity.“

Mutant forms relevant for human pathology will be isolated - for example, a form with enhanced cartilage production due to a blocking of the cartilage inhibitor gene. “We then will clone the relevant genes and get at the protein,“ Stadler said. “A protein that blocks cartilage production would be an interesting target for small molecules, because if it could be antagonized by a drug, one could stimulate cartilage production in a time-controlled and tissue-specific way.“

The mechanisms will then be controlled by using conditional knockout mice models. “If this is successful, we will look for a partner to start product development,“ Stadler added. Promising genes that have been identified by Exelixis in worms and flies will be investigated via Artemis' mouse models, too. “This alliance will be very close,“ he said. In fact, both companies are installing a fixed line and a video conferencing system to facilitate daily communication.

In a first round of financing the company raised more than DM15 million (US$8.8 million) in venture capital funding, loans and grants from the regional German governments.

New investors include FEI Biomedicine Private Equity Holding, of Basel and Zurich, Switzerland; Atlas Venture, of Amsterdam, the Netherlands; Life Science Ventures, of Mannheim, Germany; Oxford Biosciences Partners, of Los Angeles; Advent, of Boston; and Forward Venture, of San Diego.

“We were looking for intelligent money,“ Stadler said, “funds with expertise, knowledge, and experience. Besides, we wanted investors ready to put money into Exelixis as well, so that there would be no rivalry between the two. Now, we span a bridge of investors with expertise in start-up, growth, and [initial public offering] financing, as well as experience in pharma innovation and with excellent contacts to major pharmaceutical players.“

Jürgen Drews, former president of global research at F. Hoffmann-La Roche AG, of Basel, Switzerland, will join Artemis' executive committee along with Stadler; Scangos; the biotech investment banker Stelios Papadopoulous, of Paine Webber, in New York; and Jean-Francois Formela, general partner of Atlas, in Boston.

“Artemis is a logical evolution of our involvement in genetic model systems, a field we pioneered in 1994 with the founding of Exelixis,“ Formela told BioWorld International. “Exelixis pioneered the model system approach in the biotechnology industry and coined the term 'functional genomics.' Everyone is talking about functional genomics now, but the Exelixis-Artemis approach is entirely different from the usual high-throughput expression analysis procedures. While this is an indirect model that gives a lot of false positives and a huge amount of noise, ours truly annotates genes and sequence information with actual experiments based on genetics and biology. With the joining of Exelixis and Artemis, we will now create the largest industrial genetic group in the world.“

Stadler said he is glad to live in an environment friendly to biotechnology.

“Gene technology has made a tremendous progress in Germany and has a definite backing now,“ he said. “However, given the dynamic, the huge amount of money and the relatively small number of investment opportunities, we [must] avoid the risk of putting money into mediocrity. Then, failure would come inevitably. In the phase to come, we need a 'get-tough' evaluation of scientific concepts and management skills.“ *

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