SYNTEX EXPECTED TO SEEK DAMAGES FROM GENETIC SYSTEMS AND BRISTOL-MYERS
SYNTEX EXPECTED TO SEEK DAMAGES FROM GENETIC SYSTEMS AND BRISTOL-MYERS if the merger between the latter two companies is consummated, Genetic Systems told shareholders in a Jan. 10 proxy statement. The proxy outlines both the terms of the proposed Bristol-Myers merger, and the details of an earlier "diagnostic collaboration" agreement with Syntex. Shareholders are being asked to choose between the two proposals. Genetic Systems' board unanimously endorses the Bristol-Myers deal. Bristol-Myers proposed that it acquire Genetic Systems in October, two months after the biotechnology company had entered a multi-faceted R&D/investment preliminary agreement with Syntex. "Syntex has advised Bristol-Myers and [Genetic Systems] that Syntex believes it will suffer serious and irreparable injury in the event the merger is consummated, and that in its view Bristol-Myers and [Genetic Systems] are obligated to compensate Syntex for damages," the proxy states. Syntex also may seek punitive damages against the two companies and Genetic Systems Chairman Robert Nowinski, the proxy adds. Syntex also has the right "under certain circumstances" to dissolve the Oncogen cancer research and development joint venture between the three companies, according to the proxy. Syntex has a one-third share in Oncogen. "Syntex has stated that its claims against Bristol-Myers, [Genetic Systems] and Dr. Nowinski are for, among other things, breaches of expressed and implied contracts, tortious interference with contractual rights and precontractual negotiations, breaches of fiduciary duty, improper use of confidential information, unfair competition, and breaches of the implied covenants of good faith and fair dealing," the proxy says. Bristol-Meyers and Genetic Systems dispute the claims. Bristol-Myers is offering $10.50 a share in Bristol-Myers stock for each of Genetic Systems 23.2 mil. shares outstanding, based on the average closing price of Bristol-Myers' stock for the 10 days preceding the shareholders meeting scheduled for Feb. 13. The rate will not exceed .21 or be less than .16 of a share of Bristol-Myers per share of Genetic Systems. Genetic Systems' stock closed at 10-1/8 on Jan. 13. The Syntex proposal, announced in August 1985, called for the pharmaceutical firm to increase its stake in Genetic Systems to 18% by buying 4.7 mil. shares at $8.50 a share. The agreement also stipulated that Syntex would invest up to $20 mil. in Genetic Systems' R&D in the infectious disease diagnostics area. The contract included an option for the purchase of Genetic Systems' diagnostics business. Under the terms of the proposed merger, Bristol-Myers has indemnified Genetic Systems and its officers against any claims arising from the agreement with Syntex. The merger also includes two lockup provisions -- Bristol-Myers holds an option to acquire up to 18 mil. shares of unissued stock at $10.50 a share, which it would vote in favor of the merger, as well as an option to certain nonexclusive worldwide marketing rights to Genetic Systems' products not covered by third party agreements ("The Pink Sheet" Oct. 28, p. 7). The proxy notes that after the merger, Nowinski would become a corporate vice president of Bristol-Myers, while remaining the chief executive officer of Genetic Systems. President of the biotech concern, Joseph Ashley, would retain that position under a five-year contract, the agreement provides. In addition, Genetic Systems would be operated as a wholly owned subsidiary from its current location in Seattle.
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