Associate

The tough global biotechnology times are forcing a lot of companies to do a lot of things - reduce staff, refocus research, scramble for money and even file for Chapter 11 protection. They also are opening avenues for industry consolidation, an example being the planned C$12.8 million merger between Inflazyme Pharmaceuticals Ltd. and GlycoDesign Inc.

The definitive agreement has Inflazyme, of Vancouver, British Columbia, issuing 22 million shares to acquire the outstanding stock of Toronto-based GlycoDesign. Based on the 10-day average closing price of C58 cents for Inflazyme shares on the Toronto Stock Exchange leading up to the announcement, GlycoDesign is valued at C$12.8 million (US$8.7 million). At that price, each GlycoDesign share is valued at C$1.07 - a premium of 174 percent to its 10-day trading average of C39 cents before the announcement.

For GlycoDesign shareholders - who will hold about 27.6 percent of Inflazyme following the merger and who were faced with a situation in which the company was trading below its cash value in a down sector - things settle out pretty well.

Inflazyme has reason to be pleased, too. As of Jan. 31, GlycoDesign had cash and short-term investments of C$18.8 million, or working capital of about C$17.7 million. The C$12.8 million merger, at the very least then, was a solid financial move for Inflazyme, which had C$22 million in cash and short-term investments as of Dec. 31. Things get even better when taking into account GlycoDesign's technology and pipeline that includes GH9001, an anti-thrombotic in Phase I trials.

"Both sides are getting a good deal," said Ian McBeath, president and CEO of Inflazyme. "Glyco's shares had been depressed since the failure [of GD0039]. We are getting new technology in our main therapy area with real options on other products that might add value, and we are getting cash."

Inflazyme's stock (TSX:IZP) fell C20 cents Wednesday, or 25.6 percent, to close at C57 cents. GlycoDesign's stock (TSX:GD) rose C36 cents, or 90 percent, to close at C76 cents.

GlycoDesign's GD0039 Phase II failure in renal cancer was made public at last year's American Society of Clinical Oncology meeting. Due to discovered toxicities in the trial, GlycoDesign later decided to stop enrollment in the trial and, essentially, development of the product altogether. (See BioWorld Today, May 28, 2002.)

McBeath said GlycoDesign had about 30 employees, and about 10 will join Inflazyme in Vancouver, boosting the employee head count there to 64. Walter Lovenberg, Inflazyme's chairman, will remain in his position, as will McBeath; GlycoDesign CEO and President Michael Thomas, who was brought on board just about a year ago, will depart.

GlycoDesign's GH9001 is completing Phase Ia trials and is scheduled for a Phase Ib trial. The product is designed to be more effective than low-molecular-weight heparin in treating diseases and conditions in which heparin has limited efficacy. It has been in joint development with Leo Pharma, of Ballerup, Denmark. The acquisition also features GlycoDesign's anti-thrombotic, ATH, "a coating for blood contacts," such as stents and heart valves, McBeath said,.

"We're looking to partner this to companies with devices," he said, adding that the product is just completing preclinical work.

GlycoDesign also offers its CORE2 program, focused on small-molecule inhibitors of core-2 glycosyl transferase, which has applications in inflammatory diseases and could be complementary to Inflazyme's leukocyte-selective anti-inflammatory drug (LSAID) research.

Inflazyme's lead LSAID is IPL512,602, partnered with Lyon, France-based Aventis SA, which shoulders the financial burden for it. The companies are co-developing the product and plan to start a Phase II asthma study this quarter, with results expected in 12 months. In November, Inflazyme expanded the collaboration with Aventis in a deal valued at as much as $90 million. Through that deal, Aventis has the option to take over development of the compound completely after a successful Phase II, in which case it would pay Inflazyme $10 million. If the product reaches the market, Inflazyme would receive a $30 million milestone payment and then reap further benefits through a double-digit royalty, McBeath said. Aventis - and Inflazyme - remain "very excited" about the product. (See BioWorld Today, Nov. 22, 2002.)

"It's a potential blockbuster drug, this one," he told BioWorld Today.

Other products simmering in the Inflazyme pipeline include IPL550,260, which has completed Phase I trials and is being investigated in several indications outside the respiratory arena. Inflazyme is seeking a partner.

A meeting of GlycoDesign stockholders to consider the merger is scheduled May 28, but the directors of both companies have voiced their support and holders of 34.5 percent of GlycoDesign shares have agreed to vote in favor of it.

Some might view the merger as a prime example of consolidation in a struggling biotechnology sector, giving rise to a company with the resources to ride through the valley. McBeath would agree with that to an extent, since following the merger, Inflazyme would have cash to last through 2005, but the merger is more than that, he said.

"This is an example of consolidation happening in the industry, but consolidation driven by the fundamentals of adding technology and cash," he said. "Both shareholders benefit immediately by it, but it's not where we bought a technology and then have to go find the cash for it."