California Biotechnology Inc. announced Friday that it willacquire the 20 percent interest outstanding in its MetabolicBiosystems Inc. subsidiary.

In a separate announcement, the Mountain View, Calif.,company also said it has filed for a secondary offering of 2million shares of common stock. Cal Bio stock (NASDAQ:CBIO)rose $1.13 on Friday, closing at $22.75.

Cal Bio will purchase Meta Bio for 330,000 shares of Cal Biocommon stock and additional contingent stock payments. Theminority stockholders are three researchers at HarvardMedical School who formed the company with Cal Bio in 1988to develop therapeutics for diabetes and obesity. Theresearchers, Dr. Jeffrey S. Flier, Dr. Ronald Kahn and Bruce M.Spiegelman, have entered into four-year consulting agreementswith Cal Bio.

Meta Bio's lead product is insulinotropin, a protein that is inPhase II clinical trials to treat Type 2 diabetes. Insulinotropinis blood sugar-level dependent, so it mimics the behavior ofnatural insulin, said Virginia Walker, Cal Bio's vice presidentof finance. In contrast, she said, insulin injections sometimesproduce excess levels of insulin.

Meta Bio also has in preclinical development insulin analogsthat the company hopes will act more like natural insulin.

Pfizer Inc. and Cal Bio began a five-year collaboration todevelop these products in 1988. The companies have spent $18million to date. Pfizer and Cal Bio will share manufacturingand marketing rights in North America. Pfizer retainsexclusive rights in the rest of the world.

The stock offering is Cal Bio's second of the year. In March, thecompany netted $39.7 million from the sale of 2.9 millionshares at $14.66 per share. Underwriters Hambrecht & QuistInc. and Cowen & Co. have an option to purchase 300,000 moreshares to cover overallotments.

Prior to the offering and the purchase of 20 percent of MetaBio, Cal Bio has 14.7 million shares outstanding. -- KarenBernstein

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