By Debbie Strickland

A company that travels the world to find enzymes and other biomolecules has attracted $21 million in an oversubscribed round of venture capital financing.

Diversa Corp., of San Diego, has raised nearly $50 million since its founding in 1994 and now has sufficient cash for the next two years.

There's a good chance that privately held Diversa's next major financing will be an initial public offering, said Kathleen Van Sleen, chief financial officer.

"We don't need to do it at this time, but certainly we think about it," she said.

Formerly known as Recombinant Biocatalysis Inc., the company's business centers on the discovery of compounds with potential industrial, agricultural or pharmaceutical applications.

In the industrial realm, Diversa's technology could foster the replacement of chemical catalysts with enzymes, a potentially "revolutionary" change, but one that will not happen fast, Van Sleen said. While industrial partnerships offer the prospect of "more value sharing over the long haul," drug discovery and agriculture deals offer more "immediate opportunities" financially.

About half the funds raised in the current round came from new investors: New York Life Insurance Co., of New York; the State of Michigan Retirement Fund, of Lansing; Benefit Capital Management Corp., of Danbury, Conn.; and CSK Venture Capital Co. Ltd., of Tokyo.

The other half came from prior investors, including HealthCare Ventures LLC, of Princeton, N.J.; Patricof & Co. Ventures Inc., of New York; The CIT Group/Venture Capital, of Livingston, N.J.; Rho Management, of New York; and Hudson Trust, of Plainsboro, N.J.

Diversa plans to use some of the new cash to bring its first industrial enzyme products to market in 1998. One of the products, for animal feed, is the result of a collaboration with Finfeeds International Ltd., of Marlborough, U.K. The other products are undisclosed.

The company also aims to expand its drug discovery technology base in the areas of screening and assays. The effort is likely to include both independent and collaborative projects.

"[The funding] gives us the opportunity to expand into applications in our enzyme business, allows us to expand our drug discovery efforts, and allows us to bring our products to commercialization over the next two years," said Van Sleen.

More Than 500 Enzymes Discovered

On a quest for novel enzymes and bioactive compounds, including those that can survive extreme conditions, Diversa has sent researchers to Iceland, Costa Rica, Yellowstone Park and Indonesia to mine for microbial samples to analyze. (See BioWorld Today, Aug. 21, 1997, p. 1.)

There's a hitch to the process, though: Less than 1 percent of all bacteria in the environment are amenable to growth in the laboratory. To skirt around this issue, Diversa researchers extract DNA directly from field samples and use recombinant technology to translate those genes into enzymes and pharmaceuticals.

Scientists chop the DNA into variously sized fragments, which contain single or multiple genes encoding enzymes or bioactive compounds. The segments are inserted into Escherichia coli using recombinant methods.

A screening process identifies enzymes or bioactive molecules and the segments of DNA that produce the compounds of interest are then sequenced.

The company has assembled DNA libraries of microorganisms that it says "are larger than those collectively found elsewhere in the world," and has discovered more than 500 new enzymes, "almost twice the total number commercially available today."

And the list is growing by about 50 new enzymes a month, according to Diversa, which has applied for patents to cover both its technology and the molecules it has discovered.

Diversa has four collaborative agreements, including a deal signed last year with Dow Chemical Co., of Midland, Mich., to develop an enzyme as a biocatalyst for a Dow industrial process. The first project focuses on developing an enzymatic method which modifies a chemical process that produces several hundred million pounds of product per year.

The firm also has collaboration agreements with Finfeed; Boehringer Mannheim GmbH, of Mannheim, Germany; and Sigma-Aldrich Co., of St. Louis. *