BioWorld International Correspondent

PARIS - Cerep SA is taking over Molecular Engine Laboratories (MEL), a Paris-based biotechnology company specialized in identifying targets and developing therapeutics for cancer.

Cerep will issue 400,000 shares (about 3.4 percent of its outstanding equity) to MEL shareholders in exchange for 100 percent of their shares. The subscription price will be the average of the market price during the 20 trading days preceding the share issue, but will not be more than €12 or less than €9.

If Cerep's shareholders do not approve the capital increase, Cerep will acquire MEL for cash equal to the value of the share exchange - about €3.6 million to €4.8 million.

Cerep, of Rueil-Malmaison, also is committed to paying MEL shareholders royalties of 5 percent to 8 percent for the first diagnostic or therapeutic product resulting from the company's research programs, whether licensed to a third party or commercialized directly.

The takeover has been approved by both boards and is expected to be finalized within the next six months, provided MEL meets certain conditions, including a refinancing of the company, a reduction in its liabilities and a commitment by its shareholders to sell 100 percent of their shares.

Cerep CEO Thierry Jean told BioWorld International the purpose of the conditions is to give MEL a positive balance sheet. He said the takeover negotiations had been rushed and Cerep wasn't able to complete the normal due diligence. The clauses effectively take the place of that, he explained.

MEL was founded in 2000 to focus on cancer, based on the observation that some cancer cells spontaneously lose their malignant phenotype. At the time, MEL told BioWorld International that it intended to identify all 100 genes involved in the so-called "gene reversion" process. Its method entails multiplying the reverting cells and comparing the genes they express with those of the malignant parent cells.

After identifying the genes, the company consults gene banks to obtain the complete sequences or sequences them itself using its ABI 3700 sequencer, which uses capillary electrophoresis technology. MEL hoped to find about 10 sequenced genes that coded for therapeutic proteins for cancer and indicated that each product could have several applications, since they could be adapted to different families of cancers and even to individual patients.

The company has developed several tumor reversion models, identified numerous genes involved in the phenomenon and validated four genes through in vitro, in vivo and ex vivo studies performed on cells taken from patients suffering from acute myeloid leukemia. A proof-of-principle Phase II trial of a drug in that indication is under way in patients who have shown resistance to other treatments or are in relapse. In addition, the company has identified several chemical leads acting on targets involved in tumor reversion, and those are being optimized.

The cell reversion process is not confined to cancers - MEL has found it in Alzheimer's disease, as well. But MEL concentrated its activities on cancer, while offering licenses to third parties for applications in other pathologies.

Jean said that Cerep has not decided whether MEL would be absorbed by Cerep or kept as a separate subsidiary. In any event, its 20 employees will continue to operate out of the 700-square-meter premise MEL rents in Paris, while becoming a part of Cerep's drug discovery platform.

Cerep, which provides drug discovery, lead optimization and pharmacological profiling services to the biopharmaceutical industry, already strengthened its expertise in the field of cancer in January, when it acquired the Swiss clinical development services company Hesperion AG for $13 million.