REPEAT/KOSAN Raises $3 Million and Announces Combinatorial Biosynthesis Screening Collaboration with Chiron.

BURLINGAME, Calif.--(BUSINESS WIRE)--May 21, 1996--KOSAN Biosciences Inc., a recently formed biotechnology company based in Burlingame, announced today that it has raised $3 million in an early round of investment financing from venture firm Alta Partners, biotechnology company Chiron Corp. (NASDAQ: CHIR) and co-founder Daniel V. Santi, M.D., Ph.D.

As part of its investment, Chiron has begun a collaboration with KOSAN to screen a propriety KOSAN combinatorial library of polyketides against several of Chiron's disease targets.

KOSAN Biosciences has a mission to develop and apply "combinatorial biosynthesis" -- the generation of novel organic molecules derived from natural products (so-called "unnatural" natural products) by genetic engineering of biosynthetic pathways.

Combinatorial biosynthesis is a unique approach for the biological production of combinatorial libraries of organic compounds related to molecules of major therapeutic importance.

KOSAN was co-founded in 1995 by Santi, who is professor of Biochemistry and Pharmaceutical Chemistry at the University of California, San Francisco, and by Chaitan Khosla, Ph.D., assistant professor of Chemical Engineering and Chemistry at Stanford University.

Santi was founder and chairman of Protos Corp., which merged with Chiron in 1992 to help form its Drug Discovery Research group and was later founder of Parnassus Pharmaceuticals.

Khosla is the inventor of the combinatorial biosynthesis technology, which has the potential for greatly accelerating the evolution of natural products without waiting for nature.

KOSAN has exclusive rights to the Khosla technology from Stanford University and to a technology to develop diagnostic reagents with combinatorial biochemistry.

KOSAN uses combinatorial biosynthesis to produce large libraries of novel, genetically engineered chemicals related to natural products known as "polyketides."

Polyketides are a diverse group of natural products found in soil bacteria, which have yielded antibiotics such as erythromycin, anti-cancer agents such as adriamycin and a host of other therapeutics including immunosuppressants, cholesterol-lowering agents, antifungals and antiparasitic agents.

Together, polyketides have a worldwide market of more than $5 billion per year in pharmaceutical sales.

The number and diversity of polyketides in KOSAN's combinatorial libraries should eventually exceed those found in nature and new drug candidates seem certain to result.

Combinatorial biosynthesis can also be used to produce other "unnatural" natural products such as derivatives of non-ribosomal peptides used in organ transplants and infections and aminoglycoside antibiotics.

The Chiron collaboration with KOSAN will screen a propriety KOSAN combinatorial library of polyketides against several disease targets Chiron will identify. If promising leads are found, Chiron will have the right to license and develop those compounds and KOSAN will receive milestone and royalty payments.

Chiron also licensed non-exclusive rights from KOSAN to use its proprietary technology for the discovery of new diagnostic reagents using combinatorial biochemistry.

"Both Alta Partners and Chiron Corporation have a strong track record of identifying innovative, successful technologies, and we are pleased that they have shown confidence in the KOSAN technology," said Santi. "I am also personally pleased to have the opportunity to work again with Chiron to develop a new technology and new company."

"This investment, and the collaboration with Chiron, will give KOSAN the resources to develop combinatorial libraries of unnatural natural products of comparable size and diversity found in nature," added Khosla.

"The KOSAN combinatorial biosynthesis technology complements other diverse and novel approaches Chiron is assembling and managing to help speed our drug discovery and development," said Walter H. Moos, Ph.D., vice president, research and development, Chiron Technologies. "We also look forward to working again with Dan Santi, and the group that he has brought together."

Alta California Partners is a successor fund to the funds managed by Burr, Egan, Deleage & Co. (BEDCO). The General Partners Jean Deleage, Guy Nohra, Marino Polestra and Garrett Gruener, are also General Partners of Alta V, the last BEDCO-managed fund.

Jean Deleage will join the KOSAN Biosciences board of directors representing Alta Partners. Deleage was on the board of Chiron Corp. from its inception in 1981 until 1992.

"Alta Partners recognizes the potential of this novel and powerful new area of drug discovery," said Deleage. "Most of the current combinatorial chemistry companies present variations on a similar theme; KOSAN is providing a new theme."

For additional information, contact Joana L. Voglino, KOSAN Biosciences Inc., 1450 Rollins Rd., Burlingame, Calif. 94010, 415/343-8673.

CONTACT: KOSAN Biosciences Inc., Burlingame

Daniel V. Santi M.D./Joana L. Voglino, 415/343-8673

or

Chiron Corp.

Larry Kurtz, 510/601-2476