BioWorld International Correspondent

MerLion Pharmaceuticals Pte. Ltd. gained two new antibiotics that are about to enter the clinic, plus a platform for identifying novel anti-virulence molecules through its stock-based acquisition of Combinature Biopharm AG and Athelas SA.

The company also banked $25 million, which represents the first closing of a $30 million venture capital round led by Aravis Venture Associates AG, of Zurich, Switzerland, and Bio*One Capital Pte. Ltd., of Singapore.

The second closing is due before the year's end, and the enlarged entity is aiming for an initial public offering in Japan in two years.

"Nomura [Research & Advisory Co. Ltd., of Tokyo], in particular, is a significant investor in the round," Jean-Philippe Tripet, managing partner at Aravis, told BioWorld International.

The other participants include Frankfurt, Germany-based Aurelia Private Equity GmbH; Brandenburg Capital GmbH, of Potsdam, Germany; Singapore-based BioVeda Capital; Basel, Switzerland-based Novartis Venture Fund; Mitsubishi Corp., of Tokyo; and London-based 3i plc.

Aravis also was an investor in Geneva-based Athelas, which was founded in 2002 by Pierre Cosson and Jean-Pierre Paccaud while at the School of Medicine at the University of Geneva. That company, which had raised just CHF3.5 million (US$2.9 million) in seed funding, was developing a cell-based approach to identifying inhibitors of bacterial pathogenicity and had achieved scientific proof of concept, Tripet said, but it faced a bottleneck in gaining access to medicinal chemistry resources. "That's really what MerLion is bringing to the Athelas platform," he said. The firms had previously entered a two-year drug discovery and research collaboration in 2003.

Berlin-based Combinature, which was founded in 2000 by researchers and managers based at the German universities of Freiburg and Tübingen, the Research Institute for Molecular Pharmacology and the German Resource Center for Genome Research, both based in Berlin, had raised €22 million during its existence as an independent entity. However, the European market has become quite crowded of late, Tripet said, as several anti-infectives companies already have completed IPOs or have been spun out of large pharma companies.

"It would have been quite a challenge [for Combinature] to raise $25 million to $30 million with a reasonable exit prospect," he said.

Combinature is supplying the enlarged entity with its two lead molecules: a lipopeptide in development for treating hospital-acquired infections caused by multidrug-resistant bacteria and a polyketide antibiotic. That company also has built a fee-for-service business around its nuclear magnetic resonance (NMR) screening facility. The future of that organization still is under evaluation, Tripet said. It is cash positive, and it could be spun out or sold off.

MerLion was formed in 2002 through the privatization of the Centre for Natural Product Research (CNPR), a unit of the Institute of Molecular and Cell Biology (IMCB). It had secured natural product screening alliances with several large pharma and biotechnology companies, including Merck & Co. Inc., of Whitehouse Station, N.J.; Schering-Plough Corp., of Kenilworth, N.J.; Abbott Laboratories, of Abbott Park, Ill.; and Astellas Pharma Inc., of Tokyo.

That list of partners validates the screening business, Tripet said.

"We still believe that MerLion has probably the best natural products library in the world," he said, but the services business is "a numbers game" that is difficult to scale and difficult to exit. "It was a common board decision to forward integrate and to do that by acquisition," he added.

The three-way merger is not adding many personnel to the MerLion payroll. Its headcount will rise from 65 to around 72 employees, Tripet said. Combinature's CEO Harald Labischinski becomes chief scientific officer of the enlarged entity, and the company's clinical development programs will be run from Berlin.

Athelas' Geneva facility is being closed and its screening technology is being relocated to Singapore, which remains the company's headquarters and principal R&D location.

MerLion CEO Tony Buss will continue to lead the company, which earlier this year named as its chairman Richard Sykes, the former chairman of London-based GlaxoSmithKline plc and the former CEO of Glaxo Wellcome plc.