Washington Editor

After reaching a stalemate in negotiations surrounding the stock conversion rate of their pending merger, NPS Pharmaceuticals Inc. and Enzon Pharmaceuticals Inc. agreed to terminate their planned union.

NPS, a Salt Lake City company, works on products to treat bone and mineral disorders, gastrointestinal disorders and central nervous systems disorders. The company has four late-stage products. Enzon, located in Bridgewater, N.J., has developed or acquired a number of marketed products and probably is best known for its pegylation technology, a system that helps a drug stay in the body longer.

The companies in February signed a definitive agreement to create a combined company valued at $1.6 billion. Under the terms, each NPS shareholder would have received a full share of the combined entity's common stock for each NPS share owned, and each Enzon shareholder would have received 0.7264 shares for each Enzon share. Before the deal, NPS had about 35.1 million shares outstanding and Enzon had about 43 million. (See BioWorld Today, Feb. 21, 2003.)

The day the merger was announced, Enzon's stock (NASDAQ:ENZN) closed at $14.03, and NPS's (NASDAQ:NPSP) closed at $18.27. Following the breakup Thursday, Enzon's closed at $14.30, down 70 cents, while NPS's closed at $28.96, up $5.21, or 22 percent.

The marriage would have produced one company with 66 million shares outstanding, with NPS controlling about 53 percent of the stock. (The $1.6 billion value was based on the 66 million shares and NPS's closing price the day of the announcement.)

Officials at Enzon could not be reached to discuss the breakup Thursday.

However, David Clark, vice president of operations for NPS, explained it to BioWorld Today like this: "There were a number of factors that caused us at NPS, over the course of a period of time, to conclude that the exchange ratio we had originally agreed to with Enzon was no longer acceptable to us.

"We approached Enzon with an offer to renegotiate the exchange ratio. They disagreed with our assessment and we were not able to come to a mutually acceptable agreement, so both companies determined that the best course for the companies and their shareholders would be to terminate the deal."

Since NPS was not willing to continue on the basis of the original deal, it was responsible for paying the breakup fee, Clark said. And rather than paying the $30 million fee, the companies agreed that Enzon would receive 1.5 million shares of NPS's common stock. Clark said the stock can be sold, but certain restrictions do apply.

Of the split, Clark said, "We've wished Enzon well and they've wished us well. We've parted amicably and now it is up to us to get back to our business and create value in our company as we were doing before the announcement and as we've tried to do since the announcement. But now, of course, we will be doing it on our own."

Arthur Higgins, Enzon's chairman and CEO, released a prepared statement saying, "The strong fundamentals that Enzon provided to this merger of equals remain firmly in place. Therefore, as a stand-alone business we are well equipped to continue to execute our strategy and complement our internal efforts with strategic transactions designed to build a leading biopharmaceutical company."

Clark said he's unsure whether NPS will seek another merger in the near future. "Right now, we just want to get back to advancing our products in the pipeline," he said.

NPS's most advanced candidate is cinacalcet, a product being developed by Amgen Inc., of Thousand Oaks, Calif., for the treatment of secondary hyperparathyroidism. Clark said Amgen hopes to file a new drug application in the second half of 2003.

On its own, NPS's most advanced product, Preos, for the treatment of osteoporosis, is in Phase III studies. Dosing should be complete in September, leading NPS to potentially file an NDA in mid-2004.