By Randall Osborne

With a plan to knock out the entire mammalian genome within three years using its OmniBank library of mouse clones, Lexicon Genetics Inc. raised $31.8 million in a private placement of convertible preferred stock.

Lexicon, of The Woodlands, Texas, is focused on using genetically altered embryonic stem cells to produce knockout mice, which are engineered to carry mutant alleles of particular genes and have proven useful in drug development.

As the company works toward knocking out the full genome, it will step up production of its OmniBank in a new, 30,000-square-foot genomics research laboratory for phenotypic analysis. The clones will be stored in a liquid-nitrogen vault.

"We're doubling our square footage but, of the money raised, a minor portion is going toward bricks and mortar," said Michael Rusnak, vice president of business development and marketing for Lexicon. Much of the money will go toward personnel and increased cell cultures, he said.

"Look at Incyte [Pharmaceuticals Inc., of Palo Alto, a genomics company]," Rusnak said. "In Incyte's situation, to get more [gene] sequences, they threw more machines at it." Lexicon will do the same, but also will spend more money on personnel, he said.

"It's a scale-up issue," Rusnak said.

Half A Million Clones Due In Three years

OmniBank contains more than 20,000 of the clones, and the company expects to expand that number to 500,000 clones within three years, so the database will contain clones and corresponding tags representing all genes in the mammalian genome.

"We've got 5 to 10 percent of the genome done," Rusnak told BioWorld Today. Lexicon is hoping to beat the three-year deadline, he added. "We're ramping up, to see how fast we can do it," he said.

Lexicon uses automated procedures and proprietary gene trap vectors to create OmniBank. In the database, each mouse embryonic stem cell clone contains a gene trap mutation identified by the sequence tags derived from the mutated genes.

The company has two collaborations in place for access to OmniBank. One is with the non-profit Merck Genome Research Institute, of West Point, Pa., which agreed to pay Lexicon $8 million over five years to make 150 new mouse models. (See BioWorld Today, June 2, 1997, p. 1.)

Another deal for 150 mice was made in January with ZymoGenetics, a Seattle-based division of Novo Nordisk A/S, of Denmark. Financial terms were not disclosed.

In February, the company teamed up with Genetics Institute Inc., a subsidiary of Madison, N.J.-based American Home Products Corp., to provide up to 30 lines of knockout mice to specified, but undisclosed, gene targets. (See BioWorld Today, Feb. 23, 1998, p. 1.)

With a broad array of knockout mouse services, Lexicon also markets a set of gene-targeting vectors called the pKO Scrambler Series, along with The Mouse Kit, a complete reagent and cell-culture system for engineering knockout mice.

The financing was managed by Punk, Ziegel & Co., and co-led by Patricof & Co. Ventures Inc., both of New York.

New investors included Sofinov, of Quebec; Bay City Capital, of San Francisco; Walder Group, of San Francisco; GeneChem, of Montreal; S.R. One Ltd., of Philadelphia; and WPG-Farber, Present Fund, of New York. They join stockholders including Gordon Cain and BCM Technologies, both of Houston. *