HAMBURG, Germany - Evotec BioSystems GmbH, one of Germany's first biotechnology start-ups, is attracting much attention from investors and big pharmaceutical firms and, following a successful US$25 million private placement, said it plans to go public next year.

Evotec, of Hamburg, was founded in 1993 when Karsten Henco and Ulrich Aldag - both cofounders of Qiagen NV, - joined the German Nobelist Manfred Eigen, of the Max Planck Institute for Biophysical Chemistry, and Rudolf Rigler, a physicist at the Karolinska Institute, to commercialize Eigen's approach for the directed evolution of biomolecules.

Qiagen has headquarters in Venlo, Netherlands, and Hilden, Germany. The Max Planck Institute is in Göttingen, Germany, and the Karolinska Institute is in Stockholm, Sweden.

U.S. and European investors were hesitant to seed finance a German biotechnology start-up in the early 1990s, and in the end Evotec was founded with capital by a group of private investors lead by two German medical doctors.

The company originally focused on the functional optimization of enzymes and other biomolecules, but this has changed considerably, Björn Lindemann, Evotec's vice president of corporate communications, told BioWorld International.

“Although our technique worked very well - for example, we succeeded in changing the pH optimum of an amylase from pH 8 to a pH of 4 - we left this field because of the difficult market situation,“ Lindemann said. “There are only a few, big players on the industrial enzyme market, and they want to have the technology in house. So we concentrated on our proprietary fluorescence correlation spectroscopy (FCS) instead and incorporated it into an automated ultra-high-throughput screening system.“

The FCS-based screening platform enables Evotec to measure certain parameters - fluorescence half-life, diffusion velocity and energy transfer - of a single molecule passing through a volume of 1 femtoliter, which is roughly the size of an Escherichia coli. These data can be interpreted automatically as size, on-off rate, binding constants and conformational changes.

Measuring takes less than a second, so the automated screening system (called EVOscreen) has a throughput of up to 100,000 samples per day. Using a multichannel detection unit, even 1 million samples per day can be achieved. One of the biggest advantages is the reduction of the volume to 1/100th of conventional screening systems.

“This miniaturization substantially reduces cost and compound consumption,“ Lindemann said. “Besides, it speeds up the screening process and enables the design of novel assays. Assays can be performed earlier in the drug discovery process and the selection of promising clinical candidates will become much safer. This will reduce attrition rates in the clinical development phases.“

Partners Include Novartis, SmithKline

The system not only can be used to screen substance libraries, but is suited to perform functional assays using single cells or immobilized bacteria. In this case secreted proteins, transcription rates, signal transduction and endocytosis can be determined. The robotic system is even able to pick a single cell showing a promising signal so that clones can be cultured.

Targets and compounds are drawn from several collaborations Evotec entered during the last two years. Among the most noted have been agreements signed with Novartis AG, of Basel, Switzerland, and SmithKline Beecham plc, of London, in February 1997. The two deals involve research payments of approximately $30 million and comprise the supply of a complete EVOscreen detection system, including support for internal use.

Evotec currently is negotiating with a third major partner, whose name was not disclosed.

Additional collaborations will be established in a consortium of 13 partners from industry and academic institutions that successfully submitted a grant proposal in the category “Diagnostics and therapies by means of molecular medicine,“ in a competition sponsored by the German Ministry of Education, Science, Research and Technology, in Bonn.

The grant awarded to Evotec in May will provide funding for a US$26 million project that is proposed to run for four years. Seven academic research groups will contribute their targets covering a number of different diseases; three other groups and a number of participating companies will provide compound libraries.

Using a van equipped with a screening system and a micro-to-nano (m2n) interface to reduce sample size, Evotec is prepared to perform the automated screening of a library replica at a partner's site.

In-House Drug Development Targets Viruses

Evotec also has started its own drug development projects and plans to advance them to Phase I trials. The company focuses on antibacterial and antiviral drugs.

One of the projects is based on Eigen's research results. Replication of most viruses is error-prone up to a certain amount so that the virus is able to develop resistance against drugs and the immune system rapidly.

Eigen discovered that virus populations lose their infectivity if this error rate is exceeded. This can be achieved by pushing the virus replication beyond this mutation rate threshold. Then the virus mutates itself into extinction.

Using EVOscreen, the company now is screening compound libraries for molecules able to accelerate virus replication into downfall. Lindemann said model experiments using bacteriophages have been very successful, as well as preliminary trials using foot-and-mouth disease viruses.

Evotec initially will focus on hepatitis C and influenza and will collaborate with virus specialists from the Bernhard-Nocht-Institute for Tropical Diseases, in Hamburg.

In a collaboration with the Institute for Molecular Neurobiology, also of Hamburg, the company is researching neurodegenerative diseases.

To better focus on certain areas, Evotec intends to create spin-offs. The first Evotec subsidiary, Evotec Analytic Systems, of Düsseldorf-Erkrath, is developing systems for virus and prion disease diagnostics based on the FCS technology.

The company just moved to a new 45,000-square-foot facility and completed a US$25.4 million private placement with institutional and private investors, including Deutsche Bank AG, of Frankfurt. The placement was oversubscribed twofold and is believed to be the largest private equity financing of a biotechnology company in Germany ever. *