By Randall Osborne

NEW YORK — In what a leading German government official touted as the latest example of the "reverse brain drain," Ribozyme Pharmaceuticals Inc. (RPI) formed a $50 million target validation company in Berlin.

Private sector investments over the next five years, along with a grant from the German government, are expected to pay for operations of the company, named Atugen Biotechnology GmbH, the first East Germany-based biotechnology company formed by a U.S. firm. Boulder, Colo.-based RPI will retain majority ownership.

"We'll start out with, I would guess, more than $20 million in actual cash available to the company," said Ralph Christofferson, president and CEO of RPI.

The formation of the new firm was disclosed at the 12th annual Biotechnology Industry Organization conference, where Jurgen Ruttgers, German federal minister of education, science, research and technology, also spoke.

"Germany is back," Ruttgers said. "Biotechnology is booming."

In 1995, the German government launched its BioRegio competition, a funding system designed to encourage the growth of biotechnology in selected regions. So far, $203 million has been invested in companies. Of that, $147 million was for start-up firms. The Federal Republic of Germany's biotechnology sector comprises 465 companies.

Over the next five years, Ruttgers said, the German government will support RPI's venture with funds totaling $49.6 million.

Atugen, which will be focused on speeding up therapeutic target validation in vivo, will work on acquiring and developing new technologies while using RPI's existing methods, which can identify critical genes by their phenotype without prior knowledge of their sequences.

Ribozymes, RNA molecules that act like enzymes, can determine gene expression levels, or even inhibit that expression. Using RNA and other phenotypic in vitro and in vivo assays, the technique identifies those genes associated with disease and disease pathways.

RPI plans to incorporate into Atugen's platform the transgenic animal capabilities of Transgenics Berlin-Buch, of Berlin, which RPI plans to acquire for an undisclosed payment in Atugen stock.

"The actual transaction will take place once I have the cash in the bank from these initial financings — 30, 60, 90 days, something like that," Christofferson told BioWorld Today.

Transgenics Berlin-Buch uses DNA microinjection technology to produce transgenic rodents. Buch is a neighborhood in the northeast quadrant of Berlin. Spun off from the Max Delbruck Center for Molecular Medicine (MDC) in 1996, the company is located on the MDC campus and has 10 employees. Atugen, also to be founded on the MDC site, expects to have 40 employees by its third year, including those from Transgenics.

Berlin-based Schering AG — one of four collaborators signed by RPI in its first two years of operation — also has pledged to increase its involvement with RPI and Atugen as new technologies are acquired. RPI's other collaborators are Chiron Inc., of Emeryville, Calif.; the Parke-Davis division of Morris Plains, N.J.-based Warner-Lambert Co.; and Roche Biosciences, of Palo Alto, Calif.

"Our idea is that, if the partners are willing, we will transfer them to Atugen as partners," Christofferson said. U.S. partners — existing and future — may prefer to deal with domestic firms, he acknowledged.

"One of the things I expect to see, over the next year or so, is that Atugen will be hiring employees in Boulder, to form a U.S. base for them to serve U.S. partners," Christofferson said.

The idea for the German company came when Christofferson was attending a conference in Munich.

Berlin Official Initiates Deal

"A guy from the city of Berlin, from the industrial investment council, came up and said, 'Got a couple of minutes? We'd like to talk to you about some opportunities in Berlin,'" he recalled. "At that point, I had no idea what was there."

Among Berlin's attractive features is the RNA Network.

"It's got a 10-year grant from the government, about DM120 million [US$66.1 million], which can be spent on a combination of industrial and academic applications of RNA," Christofferson said. "That was a natural. Then we found the Max Delbruck Center and the transgenics company."

The center and the transgenics company already were interacting, "to develop, for example, not just knock-ins, where you put ribozymes in and knock down a target, but to have tissue-specific promoters in front of these ribozymes, and also inducible promoters, so you could turn them on in any tissue of interest at any time," he added.

"By the time we added it all up, this began to get pretty interesting," Christofferson said.

The name of the new company derives from an Asian god, Atua, and was suggested by a business development employee at RPI.

"It's one of these god of all gods, like Zeus," Christofferson told BioWorld Today. "We figured if we had the gene god on our side, we'd probably be all right."

RPI's stock (NASDAQ:RZYM) closed Tuesday at $5.375, down $0.187. *