By Charles Craig

SAN FRANCISCO — Sequana Therapeutics Inc.’s 1996 acquisition of NemaPharm Inc., which uses nematodes to understand human genetics, is paying off with the first of what is expected to be a series of functional genomics deals with pharmaceutical companies.

La Jolla, Calif.-based Sequana, which already has a gene discovery collaboration with Glaxo Wellcome plc, has negotiated a second partnership based on the NemaPharm technology.

Financial terms of the new alliance were not disclosed.

In the agreement, Glaxo Wellcome, of London, will supply Sequana with several as yet unidentified human genes.

Sequana will attempt to characterize the genes by first identifying their homologues in the nematode and then knocking them out of the worms to decipher their specific functions and how they relate to other genes in the genome.

Once the genes and their effects on diseases are understood, Sequana will make nematode models of the human disorders based on the targeted genes. Those models will be used as screens for potential therapeutic compounds provided by Glaxo. Possible disease targets were not disclosed.

Sequana will receive research support and milestone payments for drug candidates developed from the information it generates. Sequana also will receive royalties.

Kevin Kinsella, Sequana president and CEO, discussed the collaboration at the 15th Annual Hambrecht & Quist Healthcare Conference here.

Kinsella said the new partnership with Glaxo represents “the evolution of genomics beyond gene discovery to include functional analysis of genetically validated targets.“

In its gene discovery programs with Glaxo, Sequana, which uses positional cloning to find disease-related genes, is researching the genetic causes of obesity and Type II diabetes.

The gene identification efforts are separate from the functional genomics research agreement involving NemaPharm.

Scott Salka, Sequana’s chief financial officer, said sequencing of nematode and human genomes to date has determined that 25 percent of human genes have homologues in the worm.

The number of corresponding worm-human genes likely will increase with continued nematode genome sequencing, a project expected to be completed by the end of 1997.

The worm is considered an effective model for human disease because of its short life cycle, which enables researchers to generate within days new populations of nematodes with different genes knocked out for study. And unlike other animal models, the tiny nematodes can be put in microtiter wells for high through-put screening.

NemaPharm, of Cambridge, Mass., already has developed worm models of Alzheimer’s disease and others for evaluating potential effects of therapeutic compounds on cellular apoptosis to treat disorders such as cancer.

The collaboration with Glaxo is the first negotiated for NemaPharm’s functional genomics technology. Although the cost of Sequana’s NemaPharm acquisition was not disclosed, Sequana officials said they expect to recoup their investment in corporate alliances negotiated this year.

The takeover of NemaPharm was part of an attempt to add functional genomic capabilities to Sequana’s disease gene discovery programs.

In addition to the nematode, Sequana acquired rights in 1996 to functional genomics technologies involving mice and fruit flies.

Sequana’s stock (NASDAQ:SQNA) gained $0.625 Tuesday to close at $17.875.