By Debbie Strickland

Gene identification specialist Hyseq Inc. filed a registration statement with the Securities and Exchange Commission for an initial public offering (IPO) of 2.75 million shares at a price between $12 and $14 per share, which would yield estimated total proceeds of $33 million to $38.5 million

Following the IPO, the company will have 12.1 million shares outstanding. The proposed NASDAQ symbol is HYSQ.

Lehman Brothers Inc., Smith Barney & Co. Inc. and Fahnestock & Co. Inc., all of New York, will manage the offering. The underwriters have a 30-day option to purchase up to 412,500 additional shares to cover overallotments.

Sunnyvale, Calif.-based Hyseq uses the DNA array technology of its integrated HyX genomics platform to develop gene-based therapeutic candidates and diagnostic products and tests.

To protect its technology, the company has filed a patent-infringement lawsuit in U.S. District Court in California seeking an injunction and damages against Affymetix Inc., of Santa Clara, Calif. The suit alleges Affymetrix incorporated into its GeneChip system Hyseq's patented "sequencing by hybridization" method of decoding genetic information. At issue are patent Nos. 5,202,231, issued in 1993, and 5,525,464, issued in 1996. Both cover sequencing by hybridization of oligonucleotide probes.

Affymetrix denies the allegations.

Net proceeds from the Hyseq IPO will be used to develop potential therapeutic and diagnostic products, expand the company's HyGenomics data base and further develop its HyChip for sequencing large amounts of DNA.

In a separate private placement agreement, Chiron Corp., of Emeryville, Calif., and Perkin-Elmer Corp., of Norwalk, Conn., have agreed to purchase shares of common stock directly from the company. Chiron is investing $2.5 million and Perkin-Elmer $5 million.

Hyseq has existing collaborative agreements with both companies, in addition to agreements with SmithKline Beecham plc, of London, and Quest Diagnostics Inc., of Teterboro, N.J.

Hyseq has been in business five years. As of March 31, 1997, the company had $4.7 million in cash and it reported a net loss of $4.8 million in 1996.

As yet, Hyseq has no product on the market, but it does have a core technology available for collaborative research. The HyX Platform can process million of samples per year and sequence billions of bases per year, the company said. The system, which can be used for a variety of genomics applications, includes DNA probes, software and bioinformatics.

"Hyseq's strategy," according to the IPO filing, "is to engage in large-scale gene discovery and to establish collaborations to facilitate development and commercialization activities."

The company is focusing on infectious disease and disorders of the central nervous and cardiovascular systems. Eventual drugs may take the form of proteins, small molecules, gene therapy or antisense products directed at cell receptor targets. *