BioWorld International Correspondent

MUNICH, Germany - German firms Curacyte AG and VitaResc Biotech AG are merging to form an integrated biopharmaceutical company under the Curacyte name.

VitaResc, located in both Munich and Durham, N.C., has concentrated on acute diseases and infections. VitaResc has one product in Phase III testing that also has been cleared for Phase I/II testing in additional indications. Curacyte, which is based in Munich, has concentrated on discovering and developing clinical products for the fields of hematology, antithrombosis and oncology.

As part of the merger, current investors in both firms have agreed to add an additional €5.5 million (US$5.2 million) in operating capital. A further €1.5 million was raised from silent partners, bringing the combined capitalization of the merged firm to approximately €37 million. The company expects to close another round of financing within the next 12 months.

"The merger supports and speeds up our original company strategy," Helmut Giersiefen, CEO of Curacyte, told BioWorld International. Joining the companies "originated from discussions with lead investors last September. They favor building robust companies and are looking toward consolidation in the German market. Companies that plan to stay in the market need to be aware that most products will not reach the market."

Giersiefen added, "The fit is ideal because it gives us a better portfolio, diversified along different segments in the value chain. We also become more diverse in terms of risk because we are involved in different therapeutic areas. Finally, we have the opportunity to match complementary areas in discovery."

The combined portfolio of the merging companies contains products in all phases of pharmaceutical development. Its lead product, PHP, comes from VitaResc and is for the treatment of distributive shock. It is in Phase III clinical testing. The compound came to VitaResc through the 1999 acquisition of Apex Bioscience Inc., of Durham. PHP has also been approved for Phase I/II testing for effectiveness against kidney cell carcinoma and melanoma in patients being treated with interleukin-2. Curacyte has an anti-metastisis therapy in preclinical development. Finally, the firm sees therapeutic potential in its compounds Factor Xa, Thrombin and Factor XIIIa.

Top management of the merged firm will come from Curacyte, with both Giersiefen and Andreas Zaby, the chief financial officer, staying on in their current roles.

Giersiefen sees a strong possibility of more consolidation in the German biotech market. "Many companies in the German market are not yet adjusted to the true risk of biotech," he said. "Because people here haven't yet seen failure in Phase III testing, they are not fully aware of the risks and maybe not realistic enough. The market will have to see some downs as well as ups. Our goal is to translate this realization into a company strategy that works in bad weather as well as good."

The company's backers include Techno Venture Management (TVM), Technologiebeteiligungsgesellschaft, Gold-Zack Partners, Sued Venture Capital, IKB Venture Capital and Bio-M, all from Germany; The Stroh Companies, of Detroit; A.M. Pappas Strategic Equities, of Durham; NIB Capital Private Equity, of Amsterdam; and KB Lux Venture Capital Fund, of Luxembourg.