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August 6, 2001
Volume 79, Number 32
CENEAR 79 32 p. 8
ISSN 0009-2347
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Combinatorial chemistry business reemerges as drug discovery firm


Glaxo Smithkline (GSK) is selling its Affymax Research Institute to a group of venture-capital firms led by Patricof & Co. Ventures. The California-based business will operate as Affymax Inc. with an initial two-year investment of $51 million from the buyers. GSK will retain a 23% stake through stock it will receive in exchange for the business but will have no management or board control.

What do these firms--Affymax and spin-offs crop protection unit AffyAgro, gene optimization firm Maxygen, and gene chip company Affymetrix; plus drug producer Alza; DNAX Research Institute; and combinatorial materials company Symyx Technologies--all have in common? The answer: Biochemist and entrepreneur Alejandro C. Zaffaroni can be counted as one of their founders.
"Affymax has transformed itself from a technology development center, focused on combinatorial chemistry and high-throughput molecular screening, to a drug discovery company," says Tadataka Yamada, GSK's chairman for R&D. After reviewing its entire drug discovery operations, GSK decided to shed Affymax, he says.

GSK expects to see savings from the divestiture. The company will record the deal as a sale of about $4.3 million in net assets and will take a charge against this year's earnings of about $435 million, which includes a write-off of goodwill for its original purchase of Affymax. The deal is to be completed this month.

GSK acquired the now-13-year-old business for about $500 million in 1995 as the market for combinatorial chemistry and high-throughput screening technologies was heating up. Since then, GSK and other firms have benefited from integrating these technologies as standard tools in their R&D efforts. GSK also has promising investments in Affymax spin-offs.

Affymax's new investors believe it has value as an independent drug discoverer and developer based on targets it has already identified. "Drug discovery companies are valued on the power of their research platforms and the promise to deliver multiple drug candidates to the clinic," says Lori F. Rafield, general partner with Patricof. "Affymax is uniquely positioned to leverage its high-throughput-chemistry and screening platform to rapidly identify new drug candidates."

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