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Structural Bioinformatics and GeneFormatics Merge to Make a More Stable Structure


Structural Bioinformatics and GeneFormatics announced last week they had signed a merger agreement, with most of the new management team coming from SBI, and SBI shareholders gaining a majority interest in the new company.

Executives from the two San Diego-based protein structure drug discovery companies said they are merging to create an as-yet unnamed company that can provide soup-to-nuts structural proteomics services, a fatter drug lead pipeline, and enough cash to last through the present funding drought.

John Chiplin, CEO of GeneFormatics, said the company chose SBI as a merger partner because it had “scientific synergies,” as well as “a strong balance sheet” that could be combined with GeneFormatics’ own funds.

“The merger gives us more than three years of cash,” said Edward Maggio, CEO of SBI.

The Perseus-Soros BioPharmaceutical Fund, which has investments in both privately-owned companies, brought them together. “We believe that SBI and GeneFormatics make an excellent strategic fit,” said Dennis Purcell, senior managing partner of the fund, in an e-mail message.

Maggio, who will become CEO of the new company, likes to emphasize its “broad product offering.” “If a company has a problem in structural proteomics, there’s virtually no tool that our guys lack to make that sale,” he said.

The tools that SBI bring to the table include X-ray crystallography and the ProMax database, which contains about 6,000 unique computationally determined structures not available from PDB. Its other databases are StructureBank, a customizable relational database to which users can add their own structures, and Variome, a database of protein structures from polymorphic sequences.

GeneFormatics, meanwhile, has expertise in NMR-based structure analysis, its own database of protein structure and function information using both NMR and computational methods, and informatics technology for rapidly processing genome sequences and pulling out new protein-based drug targets. The company’s relational database holds information on protein sequences for nearly 100,000 human sequences and sequences from nine other genomes.

Additionally, GeneFormatics scientists have developed techniques for rapidly expressing and purifying proteins, said Maggio — a capability that SBI found enticing. “For us this has been a bottleneck in X-ray crystallography,” he said.

But there is overlap that will need to be eliminated, said Chiplin. “If you want to boil the merger down to a nutshell, we keep all of our molecular and structural biology. SBI keeps all of their cellular biology and medicinal chemistry. We have taken some of our annotation services and combined them with SBI’s computer modeling expertise.”

SBI has about 75 employees, and GeneFormatics had somewhere between 50 and 60, said Maggio. The combined headcount will be 73 people, he said, with the bulk of layoffs happening in the areas of administration, finance, accounting, and human resources.

In addition to Maggio, the new executive team will include president and COO David Muth, and vice president and CSO Karl Ramnarayan, both of whom held the same jobs at SBI; and CFO John Schmid, who was the CFO at GeneFormatics. Chiplin will stay on as a consultant for the merger and for the Asian market.

With Maggio at the helm, the new company will pursue the hybrid strategy of not only selling protein structure services, but developing drug leads internally. SBI brings to this effort its own pipeline of drug leads including a compound for sickle cell, anthrax lethal factor inhibitors, small molecule interleukin-5 receptor antagonist leads for allergy, an anti-HIV lead compound, and its Bcl-2 inhibitors for diabetes.

The merger has been approved by the boards of both firms but still awaits approval from shareholders and the California Department of Corporations. It will take about 75 days to become final, said Chiplin.

Despite stepping down from his executive role, Chiplin is happy to have gotten to this point. “People say there will be a wave of M&A in biotech, but personally I doubt it because there are so many pitfalls in these transactions,” he said. “I am just pleased we could get the deal done in such a tough financing environment.”



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