By Matthew Willett
Staff Writer
Exelixis Inc. entered an agreement to acquire the German functional genomics company Artemis Pharmaceuticals GmbH, which South San Francisco-based Exelixis helped found in 1997.
The stock-swap agreement calls for Exelixis to issue slightly more than 2 million shares for all the outstanding stock of Artemis. At Exelixis (NASDAQ:EXEL) closing share price Monday of $11.55, the deal would be valued at $23.1 million.
Exelixis disclosed the merger after markets closed. The firm also will issue to Artemis employees rights to purchase about 187,000 shares of Exelixis, in exchange for vested employee rights in Artemis share capital.
Geoffrey Duyk, Exelixis chief scientific officer, said the acquisition came about when the companies recognized a crossroad that demanded a decision to merge now, or forever hold their peace.
I think the motivation was that [Artemis] was founded with the intent that at some point we would come together, Duyk told BioWorld Today. The technological base of Artemis has matured, and its value was obvious to the people here at Exelixis. They contributed in a significant way to our internal [research and development]. In fact, their biggest customer was our R&D department. Also, there have been significant advances in the mouse and zebrafish areas, and weve made advances in our ability to turn off genes in mice and in zebrafish.
In the short term, he said, the move will clarify the relationship between the companies.
Our organizations were working intimately together, and theres always been some confusion as to, Are you the same company? he said. The long term benefit is that it makes us the leading organization in applications of model systems.
Exelixis will operate Artemis as a German subsidiary. Artemis scientific founders include Christiane Nusslein-Volhard, professor at the Max-Planck Institute in Turbingen, and 1995 Nobel Prizewinner Klaus Rajewsky, professor and director of the Institute for Genetics, at the University of Cologne.
Exelixis already owned 15 percent of Artemis, of Cologne, a company that focuses on target validation in zebrafish and mice. Artemis uses conditional knockout mice (a system that can turn off a gene in mice in one specific tissue rather than the whole organism) to validate functional data found in zebrafish.
Exelixis ended 2000 with about $112.5 million in cash, cash equivalents and short-term investments. It has about 42 million shares outstanding.
It collaborates with Artemis and Sangamo BioSciences Inc., of Richmond, Calif., for an advanced modeling system using the novel knockout mice for functional gene validation. That collaboration is a technology-sharing arrangement that calls for each company to bear its own research costs. (See BioWorld Today, Oct. 3, 2000.)
Exelixis acquired Agritope Inc., of Portland, Ore., in September 2000, in a stock swap worth $68 million. That acquisition gave the company plant biology expertise and technology, and it gave Agritope shareholders a 6 percent stake in Exelixis. (See BioWorld Today, Sept. 11, 2000.)
For now, the newly merged companies will continue to work on projects theyve been working on in the past, mainly in cancer angiogenesis.
Weve been looking at trying to define the complete set of genes involved in forming blood vessels, particularly in tumor genesis, and well use that information to make selections for small molecule and antibody approaches, Duyk said.