Washington Editor

3-Dimensional Pharmaceuticals Inc.'s stock jumped 86.1 percent Thursday on news that the company would merge with Johnson & Johnson.

The merger, scheduled to close during the first half of the second quarter, follows two successful collaborations between the companies, Scott Horvitz, chief financial officer of 3DP, told BioWorld Today.

3DP's stock (NASDAQ:DDDP) closed Thursday at $5.64, up $2.61.

"There is a lot of mutual respect between the scientists," Horvitz said. "We know each other well, and frankly, as a natural evolution of two successful collaborations, when discussions began about further expansion of the relationship, it was just natural that those discussions ultimately led to merger discussions."

J&J will pay $5.74 in cash for each of 3DP's 22.5 million outstanding shares, for a total of about $129 million. But considering 3DP's cash, the deal is expected to cost J&J about $88 million.

"We think this is a great win for 3DP's investors and obviously for the vast majority of our scientists in having a prestigious company like J&J desiring to acquire 3DP, and I think everyone here should, and does, feel very proud," Horvitz said.

3DP will release fourth-quarter earnings in February. The company had $75 million in cash at the end of the third quarter. 3DP sold 5 million shares at $15 each to raise $75 million in its initial public offering in August 2000. (See BioWorld Today, Aug. 7, 2000.)

For New Brunswick, N.J.-based J&J, which employs 108,300 people worldwide, the deal means expanding its drug discovery capabilities while reducing its dependency on outside collaborators.

"Their Theroflouor screening will add a new capability to our current high-throughput screening technologies," Marc Monseau, a J&J spokesman, told BioWorld Today. "Also, the addition of their chemical compound and library synthetic capacity improves our own ability to generate and replace new compounds for our chemical library. They will add about 500,000 compounds to our chemical library."

The relationship between the companies is a couple of years old, beginning in January 2001, when 3DP sold the worldwide rights to its orally active direct thrombin inhibitor program, 3DP-4815, to Centocor Inc., of Malvern, Pa., a wholly owned subsidiary of J&J. Centocor continues evaluating the product. 3DP received a $4 million milestone payment associated with the deal in October 2001. (See BioWorld Today, Jan. 3, 2001.)

A year later, 3DP entered an alliance with Johnson & Johnson Pharmaceutical Research & Development LLC (J&J PDR) to discover and optimize small-molecule leads directed at genomics targets. 3DP received an up-front technology access fee for its DiscoverWorks technology and research funding, and was expecting milestone payments. (See BioWorld Today, Jan. 7, 2002.)

As noted by Horvitz, upon the merger, these agreements will become part of J&J's research.

Regarding whether employee positions will be eliminated, Horvitz said it was 3DP's employees as well as its technology that attracted J&J. 3DP employs about 200 people.

Nevertheless, both companies said it's too early to speculate on certain aspects of the merger, including whether 3DP's name will change. Horvitz said 3DP will be part of J&J PDR.

When asked whether David U'Prichard, 3DP's CEO, would retain his position, both companies said, "3DP will be managed by Roger Bone, the senior vice president of research and development at 3DP, who will report to Michael Jackson, senior vice president of drug discovery at J&J PDR."

In a prepared statement, U'Prichard said, "The merger with Johnson & Johnson is a wonderful opportunity for 3DP to fully realize its drug discovery mission and to exhibit its technologies on a broad scale. Johnson & Johnson will provide an outstanding environment for our employees, and we look forward to working closely with and contributing to the success of their worldwide research and development."

The companies haven't determined whether operations will continue at 3DP's research sites located in Exton, Pa., and Cranbury, N.J. Horvitz said most decisions such as those will be made during the integration process.

Other decisions, related to 3DP's collaboration efforts, also will be made at later dates.

For example, 3DP signed a three-year deal with Bristol-Myers Squibb Co., of Princeton, N.J., in July 2000 to use 3DP's DiscoverWorks technologies for the discovery and development of drugs. On signing the deal, Horvitz said BMS paid 3DP a $19 million up-front fee and other payments have been made as well. Once the deal expires, it will be renegotiated under J&J management.

Boehringer Ingelheim Pharmaceuticals Inc., of Ridgefield, N.J., entered a deal with 3DP in late 1999 to use 3DP's DirectedDiversity technology for drug discovery efforts. The deal was expanded in April 2001.

And last January, 3DP agreed to pay GlaxoSmithKline plc, of London, $20.1 million in stock rights, and milestone fees, for GW 395058, a preclinical compound for the prevention and treatment of thrombocytopenia, or low blood platelet counts. (See BioWorld Today, Jan. 9, 2002.)

3DP applies techniques in high-throughput screening, combinatorial chemistry, X-ray crystallography, structure-based drug design and cheminformatics to discover and develop drugs in oncology and metabolic and cardiovascular diseases. The company's drug discovery technology, DiscoverWorks, is used to increase the productivity of the drug discovery process, according to the company.