BioWorld International Correspondent

Three Finnish biotechnology firms agreed to a merger that would create the country’s largest biotechnology company, with compounds in Phase I, II and III trials, and 115 employees. Biotie Therapies Oyj and Oy Contral Pharma Ltd. and its subsidiary, Carbion Inc., plan to join forces, subject to Contral Pharma successfully raising a minimum of EUR15 million in a private placing with institutional investors by June. It already has received preliminary commitments totaling about one-third of the required capital.

The new entity would also be called Biotie Therapies and would be based in Turku. Shareholders in Espoo-based Contral Pharma, which was established in 1998 and has 30 employees, would hold the largest block of equity. Under the terms of the merger agreement and prior to the dilution effect of the planned new share issue they would hold 53.5 percent of the enlarged company, Biotie’s shareholders would have 43.7 percent and Carbion’s minority shareholders would get 2.8 percent of the equity. Assuming the deal goes ahead, Biotie would suspend its current listing on the new market of the Helsinki Stock Exchange, and the new entity would relist at the beginning of November.

Scale is the main driver behind this deal. “It is mainly driven by the feedback from the market,” Markku Jalkanen, CEO of Turku-based Biotie, told BioWorld International. “It is a feeling that we must be bigger in order to be recognized by international investors and the financial community.” The three companies, he said, expect they could realize savings of 30 percent, or EUR10 million, in 2003 through synergies and rationalization.

Jalkanen is set to be chief scientific officer and deputy CEO of the enlarged company. It would be led by Kauko Kurkela, currently CEO of Contral, while Hannu Hanhijarvi, a Biotie board member, would take on the role of chairman.

The final value of the transaction will be determined by Biotie’s share price when the deal is consummated. Based on its share price of EUR3.45 at Monday’s close, Biotie is valued at approximately EUR61 million, down more than 18 percent from its market capitalization of EUR75 million at the end of 2001, at which point it held EUR9.5 million in cash.

Patent litigation with Finland’s largest pharmaceutical company, Espoo-based Orion Corp., has been a major contributor to the decline. The case was heard in January and February. An outcome is expected later this week. “That decision will not influence the merger. Both parties have realized the risk and the possibilities,” Jalkanen said.

The merged company would have three products in clinical development for four indications. Contral’s lead compound, nalmefene, an opioid receptor antagonist, is in Phase III trials for treatment of alcoholism and alcohol abuse and is expected to reach the market in 2004. The same compound also is in Phase II trials for treatment of pathological gambling. Biotie is developing a synthetic form of the antithrombotic drug heparin, which just entered Phase I trials. Huvap, a humanized monoclonal antibody that targets vascular adhesion protein-1 (VAP-1), which plays an important role in the inflammation response, is slated to enter the clinic later this year.

Carbion, which was established in 1999, is still at the discovery stage. The company, which has 20 employees, is developing a glycobiology-based technology platform and is engaged in the discovery of carbohydrate-based drugs for cancer and infectious disease. The merged company plans to focus long term on that area.

Biotie was advised by Mandatum Bank plc, while Contral was advised by White & Case LLP.

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