Xenova Group plc and three individuals formed a new U.S.-basedcompany Wednesday to speed the conversion of potential leads intodrug candidates for Xenova, and also provide additional partneringopportunities.

The new company, MetaXen LLC, was capitalized initially with $1million, provided by majority shareholder Xenova and the three otherfounders _ Michael Ross, Lutz Giebel and Maris Hartmanis. Futurefunding will be provided by Xenova and corporate partners.

Xenova, of Slough, England, also formed a new preclinical division,which will include 25 research scientists in the U.K. and be directedby Ross, MetaXen's CEO and former scientific founder of ArrisPharmaceutical Corp., of South San Francisco. MetaXen initially willbe based in Palo Alto, Calif.

Giebel, former director of molecular biology at Arris, will be vicepresident of research at MetaXen. Hartmanis is with PharmaciaBiotech AB, of Uppsala, Sweden.

The new company will incorporate a number of research andpreclinical tools. It will include a structure-based drug design groupwith combinatorial and computational chemistry and crystallography;an in vitro metabolism and drug group to create high-throughputassays; and a group working on genomics, transgenic animal modelsand bioinformatics for identification of new targets.

Xenova's focus is developing small-molecule drugs originallyderived from naturally occurring microorganisms, such as fungi andbacteria, and from plant extracts. It has 64,000 purified naturalchemical mixtures on its NatChem Library. The company has twoproducts in early stage human studies.

"The intent of setting up MetaXen is to take advantage of the wealthof early discovery leads coming out of Xenova's discoveryoperation," Ross said, adding that all the technologies being broughtto the effort are important pieces in building the data base. "But theglue that holds this together is an informatics approach that allowsparallel optimization of the various characteristics of a drug lead."

Xenova CEO Louis Nisbet said his company intends to keep majorityownership of MetaXen. The founders will hold minority stakes andkey future employees will be eligible for options in MetaXen.Provisions have been made for MetaXen shares and options to betraded for shares and options, respectively, of Xenova in September2000. The exchange ratio will be determined by achievement ofcertain milestones, but at most it will be one MetaXen share or optionfor one Xenova share or option.

Nisbet said milestones for MetaXen include getting drugs intodevelopment, creation of partnerships and the stock performance ofXenova (NASDAQ:XNVAY).

"The challenge," Nisbet said, "was to put something together thatwould provide incentives for the founding team and reward them ifthey made a tremendous success of MetaXen. There really is a goodincentive for them to do that, a milestone-oriented process four yearsfrom signing."

Cancer Targeted First

Drug candidates that emerge from MetaXen's research will bedeveloped by Xenova or made available for partnerships. MetaXen'sinitial focus will be on developing candidates for cancer.

"MetaXen will greatly expand the range of technologies available tobe applied to Xenova's programs," Nisbet said. "Our natural productsdrug discovery technologies have in the past generated more potentialdrug leads than we have been able to progress. MetaXen is expectedto accelerate the conversion of such leads into drug candidates andenable Xenova to add value to them."

Ross said, "Xenova is perhaps the expert in natural productsscreening. They also have developed a general expertise in high-throughput screening, and supplement the screening capabilities withincremental combinatorial chemistry libraries. The primary part forMetaXen is lead expansion and turning the hits into developmentcandidates.

"From the outset MetaXen will be off to a running start, working withXenova's advanced programs in topoisomerase inhibitors andmultidrug resistance modulators for cancer treatment, and PAIinhibitors for thrombosis."

Xenova's lead candidate is XR5000, an anti-cancer compound thatinhibits topoisomerase. It is in late Phase I studies. XR9051, from theXR1500 series, is in Phase I studies and designed to addressmultidrug resistance. A compound that blocks PAI, a tPA regulator,is in late preclinical testing.

Xenova also has screening or drug discovery relationships with anumber of companies. n

-- Jim Shrine

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