Chiroscience is buying Darwin Molecular Corporation, a US gene-based drug discovery company started in 1991 with backing from Messrs Gates and Allen and several venture capital groups.
The all-share deal will see the two men convert their 14 per cent stakes in Darwin for holdings of slightly more than 3 per cent each in Chiroscience.
The news initially sent shares in the British group 24p higher and they settled 10p up at 358.5p
Darwin is involved in investigating the human genetic make-up to determine whether people's genes predispose them to diseases such as cancer and asthma. Chiroscience hopes that the combination of Darwin's gene discovery capability with its own expertise in "chiral" chemistry - a way of purifying compounds - will enhance its ability to discover new drugs. The group has already identified key genes involved in two genetic disorders, Werner's Syndrome, which accelerates the ageing process, and early-stage Alzheimer's disease. It is also claims to be on the way to identifying genes involved in psoriasis and osteoporosis, or brittle bone disease.
Mr Gates welcomed the deal yesterday. "There is a strong synergy between these two companies which should accelerate the translation of Darwin's excellent science into therapeutic products. This merger is the right move for both companies."
Those sentiments were echoed by John Padfield, Chiroscience chief executive. "This deal creates a unique bio-science company. Nothing similar exists in the biotech world which goes from gene to drug."
Dr Padfield described Darwin as a drug-hunting company, not involved in genome sequencing or gene therapy.
The idea would be for the combined group to identify a gene target, then some molecules to hit the target, followed by the development of a suitable drug.
"The aim is to build a broad portfolio of targets and molecules. It improves your hit rates," he said.
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