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CORANGE MAKING $110 MIL. EQUITY INVESTMENT IN CELLPRO AND CEPRATE STEM CELL SELECTION PRODUCTS; 50% PREMIUM VALUE PLACED ON TECHNOLOGY AND ITS POTENTIAL

Executive Summary

Corange's $110 mil. equity investment in CellPro will give the Boehringer-Mannheim parent a 15% ownership interest in the Bothell, Wash.-based cell-separation technology company. The equity purchase is part of a potential $220 mil. Corange will invest in CellPro under an agreement announced Dec. 6. CollPro and Corange will collaborate to develop and market stem cell selection products for therapeutic applications outside of North America. Corang's will also license worldwide rights to diagnostic products using CellPro's cell-selection technology in exchange for royalties. CellPro expects to submit a premarketing approval application to FDA before the end of the year for its CEPRATE SC stem cell separation device for use in bone marrow transplantation to treat cancer. The company already is selling a CEPRATE system for research use in the U.S. and began marketing the system in Europe in September. Boehringer-Mannheim said it plans to develop the CEPRATE technology for bone marrow transplantation, high dose chemotherapy, autoimmune diseases and gene therapy. The device is in Phase I/II trials for peripheral stem cell transplantation, high dose chemotherapy and allogeneic bone marrow transplantation. CellPro expects to begin trials in early 1994 in liver transplant patients using donor stem cells to prevent transplant rejection. A longer-term project is using bone marrow transplants to cure autoimmune diseases such as lupus and rheumatoid arthritis. The CEPRATE system has been used in several gene therapy trials involving transduction of stem cells. The pioneering ADA deficiency trials, for instance, use the CellPro device. Boehringer-Mannheim says it has a gene therapy research program, although it is not among the first wave of companies to collaborate in human clinical trials. Boehringer-Mannheim expects to develop CellPro's in vitro diagnostic technologies for use in fetal cell diagnostics, cancer and selected infectious diseases. CellPro expects to begin clinical trials of a cancer diagnostic and a fetal cell diagnostic using cells extracted from maternal blood within a year, the company said. Corange will pay $50 mil. for 8% of Cellpro (1.2 mil. newly- issued shares) upon closing of the deal and $60 mil. for an additional 7% of the company 15 months after closing of the deal. CellPro will also receive a $10 mil. signing fee and R&D/milestone payments of up to $100 mil. The hefty premium to be paid by Corange is in keeping with other recent buy-ins involving cell separation companies. Sandoz paid more than double the market value with its $392 mil. purchase of a controlling interest in SyStemix in late 1991 ("The Pink Sheet" Dec. 23, 1991, p. 3). Rhone-Poulenc Rorer paid a 58% premium for 37% of Applied Immune Sciences in June ("The Pink Sheet" June 7, p. 10). Corange is valuing CellPro at a 50% premium to its recent per share price of 28-3/4. Under its new CEO Max Link, Corange is building a portfolio of biotechnology investments similar to that established by Sandoz during Link's tenure there. In late October, the company committed up to $131 mil. in equity and R&D support to the monoclonal antibody research firm Protein Design Labs ("The Pink Sheet" Nov. 1, T&G-10). Boehringer-Mannheim is also looking to acquire gene therapy and xenotransplantation technologies, the company said. Boehringer-Mannheim Therapeutics "operates the largest biotechnology facility in Europe" in Penzberg, Germany, the company says. Sales for the therapeutics division totaled $864 mil. in 1992. Boehringer-Mannheim Diagnostics "is the second largest producer of in vitro diagnostics products and services in the world," with sales of $1.8 bil. in 1992. The agreement is subject to antitrust review "and other normal closing conditions to sales of equity in private placement transactions," the companies said. The deal is expected to close in the first quarter of 1994.

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