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ALZA SPIN-OFF TO BE HEADED BY WYETH-AYERST RESEARCH EXEC VP NEIL

Executive Summary

ALZA SPIN-OFF TO BE HEADED BY WYETH-AYERST RESEARCH EXEC VP NEIL who will become chief executive officer of Therapeutic Discovery Corp., which will become a separate public company through a distribution of units to Alza shareholders. The distribution is expected to occur "on or about June 11," Alza said. Gary Neil, PhD, whose appointment was announced by Alza on April 1, chaired a Wyeth-Ayerst steering committee to oversee the Alza/American Home Products joint R&D/marketing agreement, signed in November 1991, for the development of off-patent pharmaceuticals using Alza's oral, transdermal and electrotransport drug delivery systems ("The Pink Sheet" Dec. 2, 1991, T&G-9). Previously, Neil spent 23 years at Upjohn, most recently as VP-discovery research. In a prospectus describing TDC, Alza said it "believes that there currently exists a unique opportunity to pursue a new business centered on the development of products for commercialization by Alza, in addition to its traditional client- sponsored product development/royalty business." The two "primary factors that create this opportunity," Alza explained, "are Alza's proven ability to develop cost-effective pharmaceutical products using its broad base of proprietary drug delivery technologies and the increasing concentration of purchasing decisions for pharmaceutical products." By developing its own products through a separate company, Alza will be able to pursue opportunities for self-developed products without creating the impression among client companies that royalties are helping to fund potentially competing products. The spinoff will allow "Alza's financial results to continue to reflect principally its traditional client-sponsored business by providing Alza with research revenues from TDC to reimburse Alza for any research and development expenses incurred by Alza in developing the TDC products for TDC," the prospectus states. TDC will be capitalized with $250 mil. in cash provided by Alza. "Alza has no current intention to provide additional funding to TDC," the prospectus states. For every 10 shares of Alza common stock held, each Alza shareholder will receive one unit consisting of one share of TDC and one warrant to purchase one-eighth of one share of Alza for a per share exercise price of $65. Merrill Lynch is advising Alza on the spin off. Alza will have an option to buy out TDC upon written notice at any time until Dec. 31, 1999, but loses the option if TDC's cash and equivalents dip below $5 mil. and Alza does not purchase the company. The purchase price will be at least $100 mil., the prospectus indicates, with various formulas suggesting possible higher prices. Alza has used numerous financing and spin-off strategies during its 25-year history. For example, the company formed Bio- Electro Systems in 1988 to fund development of bioerodible polymer drug delivery and electrotransport. Alza bought back BES in 1991.
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