Algene Biotechnologies Corp. is intent on discovering causal and protective genes that will lead to new diagnostic and therapeutic products for human disorders such as Alzheimer's disease, bipolar depression and schizophrenia.

Toward that end, Algene, of Montreal, will apply its methods to three undisclosed disorders for Myriad Genetics Inc., of Salt Lake City.

The two companies have agreed in principle to a $5 million research deal in which Myriad will pay Algene in the form of convertible debentures issued quarterly over a three-year period, based on Algene's meeting research milestones. Under the agreement, scheduled to be signed within a few weeks, Algene will assign worldwide exclusive rights to research results to Myriad in exchange for royalties on sales.

Algene's research will be financed by the issuance of debentures bearing interest at an annual rate of 6 percent, and which are convertible at Myriad's option into Class B subordinate shares at the market price upon their issuance. At the end of three years, if the debentures have not been converted, they will be repaid at the option of Algene, either in cash or in exchange for acquired royalty rights.

"We will help Myriad find causal genes in three diseases," said Michel Gosselin, vice president of administration and finance at Algene. "We will collect case samples and do geneotyping, and will work on the genomics to narrow it down."

Algene, founded in 1992, focuses on founder populations for its genetic research. Founder populations comprise individuals descended from a limited number of common ancestors in recent centuries.

As a result of this characteristic, Algene believes that for complex genetic disorders, founder populations are one of the best models for case sampling in order to monitor the transmission of genes across succeeding generations. Algene's research is based mainly on Canadian founder populations, but the company recently identified other such populations elsewhere in the world.

Algene's researchers work in collaboration with the Centre Hospitalier Cote-des-Neiges, a geriatric center affiliated with the University of Montreal.

In addition to the Myriad collaboration, Algene reported it will close on a C$2 million to C$3 million (between US$1.3 million and US$2 million) private placement led by T2C2/BIO, of Montreal, in the next few weeks. Also participating are Montreal-based investors Sofinov, Business Development Bank of Canada, and Society Innovatech du Grand Montreal, along with the Canadian Medical Discovers Fund Inc., of Toronto.

Part of the funding will be used to acquire intellectual property from a university research group working in the areas of breast cancer and osteoporosis, among others, for which patent applications for susceptibility genes have already been filed.

In addition, Michael Dennis will be named chairman, interim president and CEO, replacing Denis Gauvreau, one of the founders.

"The company is now going to focus on commercialization and extending our platforms," said Richard Labbe, Algene's director of finance.

The company's first collaboration was with Janssen Pharmaceutica N.V., of Beerse, Belgium, a wholly owned subsidiary of New Brunswick, N.J.-based Johnson & Johnson, to work on the genetics of schizophrenia. The 1995 collaboration was built on Algene's mapping expertise, which is based on a systematic application of identity-by-descent and linkage disequilibirum concepts to the study of the genetics of complex disorders in founder populations. n