Zynaxis Inc. entered into agreements Thursday to acquire SecretechInc. and for a $3 million private placement. Together the deals willnearly triple Zynaxis' outstanding shares.

Zynaxis, of Malvern, Pa., is issuing about 3 million new shares tostockholders of Secretech, a Birmingham, Ala., company specializingin mucosal immunology and virology. (See BioWorld Today, Jan. 18,1995, p. 1.) The financing could add another 6 million shares.

Zynaxis currently has about 5.2 million shares outstanding. Thatcould increase to 14.2 million if all units are converted and warrantsexercised. Zynaxis' (NASDAQ:ZNXS) stock closed at $1.50Thursday, up 6 cents.

The financing, expected to close early next month, involves issuanceof 1.5 million units at $2 each. Each unit consists of one share ofSeries A preferred stock convertible into two shares of common stockat $1 each, and a warrant with a five-year term to purchase twoadditional shares at $1 apiece.

"It's a very dilutive financing, Frank Conway, Zynaxis' controller,told BioWorld. "Both companies have been trying to raise money ontheir own. It was a cost of the transaction."

Conway said the financing together with other planned fundingactivities should take Zynaxis "well into 1996." Other financingpossibilities include the sale of diagnostics business, corporatecollaborations, subleasing space and, possibly, equity financing,Conway said.

Major investors in the financing were S.R. One Ltd., of Philadelphia,a previous investor in Zynaxis, and Euclid Partners Corp., of NewYork, which has a position in Secretech.

Secretech, founded in 1989 by researcher from the University ofAlabama at Birmingham, has an anti-allergy product in Phase II trialsin Europe and a flu vaccine ready to enter Phase I studies this year. Arotavirus vaccine is the next clinic candidate.

Conway said the Birmingham operation will relocate to Malvern, andmost of Secretech's 15 employees will not be joining Zynaxis. _ JimShrine

(c) 1997 American Health Consultants. All rights reserved.