By Randall Osborne

Two months after backing out of a collaboration with troubled CellPro Inc. for cancer treatments, Corixa Corp. said it has signed an agreement to acquire GenQuest Inc., an oncology-based functional genomics company, for about $11.8 million.

"I hate to use the 'synergy' word, but there's synergy in it," said Michelle Burris, chief financial officer of Seattle-based Corixa, which is focused on vaccines for cancer and infectious diseases. The buyout of GenQuest, also of Seattle, was unrelated to ending the CellPro pact, she added.

"We've had an agreement [with GenQuest] since 1996," Burris said. "We had 50 percent ownership, and at the end of 1996, when GenQuest did a $9 million equity financing, it dropped to just under 17 percent." Also since 1996, the companies have licensed rights in certain cancer technology fields to each other.

Under terms of the purchase agreement, Corixa will pay $4.5 million of the total amount in cash, with the remainder paid in Corixa common stock, using the average Nasdaq share price during the period from May 23 to July 21.

The deal is expected to close in August, qualifying as a tax-free reorganization, and will be accounted for as a purchase.

Privately held GenQuest, founded in 1995, uses functional genomics and differential gene expression to discover genes associated with cancer, DNA damage, senescence, cellular proliferation and terminal cell differentiation.

The company, which had facilities in Seattle and New York, will consolidate its operations in Seattle, and will be fully integrated into Corixa. The combined entity will have about 100 employees dedicated to vaccine development.

Corixa focuses on T cell vaccines to treat cancer and infectious diseases. The company has identified a protein known as Leishmania elongation Initiation Factor (LeIF), an enhancer of immune response. Combined with certain antigens, LeIF calls forth a stronger antibody response than the antigen would elicit alone.

In March 1997, the company signed a research agreement giving option rights to LeIF to Pasteur Merieux Connaught, which has subsidiaries and divisions in Lyon, France; North York, Ontario; and Stillwater, Pa.

In May 1996, Corixa agreed to collaborate with Vical Inc., of San Diego, to develop cancer products using the LeIF technology. In November 1996, the company formed a pact with CellPro, of Bothell, Wash., to develop ex vivo cancer therapies.

Corixa was founded in 1994. The company partnered its infectious-disease vaccine program in October 1995 with SmithKline Beecham Biologicals S.A., of Rixensart, Belgium, which is also working with Corixa on cancer vaccines. Smithkline Beecham Biologicals is part of London-based SmithKline Beecham plc.

In development by Corixa are vaccines for cancers of the breast, ovaries and lung, as well as lymphoma.

As a result of the GenQuest buyout, Corixa, which raised $39 million in an initial public offering last fall, expects to lure more corporate partners to commercialize non-vaccine uses of gene discoveries made in the vaccine efforts. (See BioWorld Today, Oct. 6, 1997, p. 1.)

"The whole Corixa model is partner-driven," Burris said. "We expect some partnerships in the GenQuest technology in the next few months."

Earlier this year, Corixa ended its collaboration to develop ex vivo cancer therapies with CellPro, which was ordered by the court to escrow its revenues as part of a patent-infringement lawsuit. (See BioWorld Today, April 27, 1998, p. 1.)

The relationship with GenQuest always was different, Burris said.

"In many respects it was a financing vehicle for Corixa, but it was also its own company," she told BioWorld Today. The buyout "made sense, in terms of what was partnerable," she added.

As of March 31, Corixa had $57.7 million in cash, with a net loss of $2.8 million for the first quarter. The company's stock (NASDAQ:CRXA) closed Tuesday at $7, down $0.25. *