Sagres Discovery moved its research inside the cell with its acquisition of MemRx Corp., a crystallization and structure-based drug discovery company.

The privately held companies completed the deal through an all-stock transaction that became effective March 28, although the number of shares was not disclosed.

Davis, Calif.-based Sagres' approach to the business of biotechnology is Oncogenome, a set of oncology targets built from mouse model animal tumors. It has an internal therapeutic antibody development program that was started in December. What MemRx, of San Diego, brings is the ability for Sagres to go inside cellular walls.

"Sagres has the Oncogenome, the largest collection of cancer-causing genes in the industry," said David Ferrick, Sagres' CEO. "Now, with MemRx, we can go after intracellular targets, in fact all targets, in a rational way. It creates a capability to make cancer biology prioritize our research."

MemRx was founded by Michael Mendez, co-inventor of Fremont, Calif.-based Abgenix Inc.'s XenoMouse, and Raymond Stevens, co-founder of Syrrx Inc., of San Diego. The company had eight employees and two consultants at the time of the acquisition. Six employees will remain in San Diego and be led by Mendez, the seventh employee. Stevens, the eighth, will spend the next year working exclusively with Sagres on structure-based drug design of membrane proteins. He also will continue his professorship at The Scripps Research Institute. The two consultants now will serve as consultants to Sagres. With the additions, Sagres increases to 44 employees.

Sagres' antibody platform should reach the preclinical stage by mid- to late 2004, Ferrick said, and the company hopes to file its first investigational new drug application by early 2005. The combined companies will continue to work exclusively on cancer, and Ferrick said most of the work is on "the big four: breast, colorectal, lung and prostate."

Sagres hopes to complete Oncogenome this year.

"There are a finite number of genes that can mutate and cause cancer," Ferrick told BioWorld Today. "Using the mouse genome, we think we can find 60 percent to 80 percent, or maybe even higher" of all cancer-causing genes in a mouse model.

Typically in drug discovery, Ferrick said, researchers "look at a lot of genes and their association with cancer," followed by choosing the best of them for screening. Sagres, however, "is not using a large number in a blind-screening, hit-or-miss approach," instead using its platform - and now MemRx's, too - for a "biologically valid and rational approach."

Sagres is angling for a $35 million Series C round of financing, originally expected to close in June. The difficult financing environment has pushed that back a little, but Ferrick still expects a first closing in July and the final close in early fall. In January, the company signed a deal with Boehringer Ingelheim International GmbH, of Ingelheim, Germany, to identify oncology drug targets. Financial terms were not disclosed, but the deal was described by the company at the time as a sort of "coming out."

"Right now we have a lot of momentum," Ferrick said. "And we have a couple of other deals that are cooking right now.

"With this acquisition, it puts Sagres in a very forerunner position. We represent the new shift in how drug discovery will occur."