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ENZON BUYING GENEX PROTEIN ENGINEERING TECHNOLOGY FOR $ 6.1 MIL.

Executive Summary

ENZON BUYING GENEX PROTEIN ENGINEERING TECHNOLOGY FOR $ 6.1 MIL. worth of Enzon stock and warrants to purchase additional stock, the firms jointly announced June 12. Enzon said the acquisition will provide "immediate access to several therapeutic proteins of immediate interest . . . and to Genex's fermentation, protein purification and protein engineering capabilities." Enzon's core technology is the use of polyethylene glycol (PEG) to improve drug delivery. The proposed deal, scheduled to close in September pending Genex shareholder approval, calls for Enzon to acquire all of financially troubled Genex's outstanding stock for "approximately" 701,000 shares of Enzon common stock, worth $ 6.1 mil. based on the June 11 closing price of 8-3/4. The offer also includes 583,000 three-year warrants to purchase Enzon common stock for $ 18 a share. Outstanding Genex stock includes 20.3 mil. common shares, 11.6 mil. Class A shares and 1.3 mil. Class B shares. South Plainfield, N.J.-based Enzon said it expects to keep most of the Genex scientific team; Genex recently pared its 65- person staff to 29 employees, most of whom are directly involved in R&D ("The Pink Sheet" Nov. 19, T&G-8). The combination of Genex's experience in recombinant protein design and development with Enzon's PEG drug delivery system positions Enzon to "compete in all aspects of protein drug development in the most cost- effective manner," the firm said. Access to raw materials in-house will speed up the movement of new products into the pipeline, Enzon Vice President Gail Wasilewski told a June 12 Industrial Biotechnology Association meeting in New York. She said the company expects to file three new INDs by year-end. Genex holds 26 U.S. patents and has an additional 15 on file. The Gaithersburg, Md.-based firm was issued a patent in August covering the genes, vectors, hosts and manufacturing methods necessary for producing single-chain antigen binding (SCA) proteins, which it believes have the potential to replace monoclonal antibodies in the diagnosis and treatment of cancer. Genex has a pilot production facility at its Gaithersburg headquarters. The agreement follows by five months Genex's announcement that it had retained Allen & Company and Techno-Venture to explore sale or merger options in the U.S. and Japan, respectively. The firm has lost $ 12 mil. in the past two years. Revenues in 1990 totaled $ 3.6 mil., down from $ 5 mil. the previous year. The downslide for the 13-year-old firm started in 1985 when Searle stopped purchasing Genex's genetically-engineered L-phenylaline, the amino acid used to manufacture the artificial sweetener Nutrasweet. Enzon completed a 3 mil. share stock offering in mid-April, which netted around $ 36 mil. after overallotments, the company said. Approximately 18.1 mil. shares of common stock are not outstanding. A year earlier, Enzon completed a $ 25.7 mil. private placement of over 1 mil. shares of Series A Cumulative Preferred Stock.
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