GENZYME ACQUIRING INTEGRATED GENETICS: $30 MIL. IN POOLED CASH
GENZYME ACQUIRING INTEGRATED GENETICS: $30 MIL. IN POOLED CASH will be available for future product development activities from the combination of the roughly $15 mil. that each company holds. On April 18, the two Boston area biotech firms announced the signing of a letter of intent to merge Integrated Genetics into Genzyme via a swap of newly issued Genzyme stock for shares of Integrated Genetics. The agreement represents the coming together of biotech companies that have followed different paths since each was founded in 1981. Employing glycoprotein remodeling technology to the manufacture of fine chemicals and enzymes for major pharmaceutical and diagnostics companies, Genzyme has succeeded in generating short-term profits (1988 net income of $671,000 on revenues of $25.8 mil.). The company currently is a major supplier of clindamycin phosphate and enzymes used in cholesterol and heart attack diagnostic tests, and also manufactures hyaluronic acid, biologicals such as interleukins and lymphokines, and a line of immunoassay tests for research purposes. For the first quarter of 1988, Genzyme reported a 232% increase in net income to $300,000 on revenues of $8.6 mil., which were up 58%. Recently, Genzyme started to manufacture bulk pharmaceutical products. In 1989, the company began production of the antibiotic clindamycin phosphate at facilities in Haverhill, England. While working on short-term projects, Genzyme is also pursuing a novel, orphan therapeutic. The company currently is conducting clinical trials of Ceredase, a glucocerebrosidase product for treating Gaucher's Disease. By contrast, Integrated Genetics' has focused on developing sophisticated recombinant therapeutics via corporate sponsorships. Revenues in 1988 totaled $9.5 mil., but the company lost $7.7 mil., compared to a $2.7 mil. loss in 1987. Integrated Genetics' first generation tissue plasminogen activator (TPA) is currently in Phase III clinical trials in Japan. The product is being developed in conjunction with Toyobo and BASF. The company also is in preclinical trials with a proprietary second generation TPA for which it is currently seeking U.S. and European corporate sponsors. In addition, Integrated Genetics is conducting Phase III trials of erythropoietin (EPO) with Toyobo in Japan and Behringwerke in Europe. Other development projects include labeled TPA for imaging blood clots in conjunction with DuPont, agreements with Serono to develop human fertility hormones, and an agreement with Johnson & Johnson subsidiary Ortho to develop a megakaryocyte stimulating factor. The firm is developing a Protein C product on its own. A bright spot at Integrated Genetics has been the GENE-TRAK diagnostics development joint venture with Amoco, which contributed $4 mil. in license fees in 1988. During 1988, GENE-TRAK brought to market tests for Salmonella, Listeria and E. Coli. The company also began selling an HIV assay to researchers during the year. Under the proposed merger, Integrated Genetics shareholders will receive .23 shares of Genzyme common stock for each Integrated Genetics share. In order to conduct the stock swap, Genzyme will issue 2.4 mil. new shares to increase total outstanding shares to 10.9 mil. Genzyme is acquiring Integrated Genetics at market price without a premium. At Genzyme stock's April 21 close of 9-3/8 the new shares would be worth approximately $23 mil., just less than the market value of about $25 mil. at the end of March. "This merger will create a major biotechnology company with the advantages of size, established products, marketing and research leadership," commented Genzyme President and CEO Henri Termeer, who will serve as chairman and CEO of the new company. "Integrated Genetics' products currently in development, coupled with the exciting potential products resulting from the merger, will materially augment Genzyme's base of existing and near-term products." The Genzyme/Integrated Genetics merger may presage the long-awaited shakeout among smaller biotech companies, and is also the first major acquisition of one biotech company by another. Earlier this year, Liposome Co. and Liposome Technology announced an agreement in principle for a 50/50 merger.
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