BioWorld International Correspondent
PARIS Genset SA is planning to sell its Oligos division, which is engaged in the manufacture and sale of oligonucleotides, to the Poligo Division of the German chemical company Degussa for EUR25 million (US$21.6 million) in cash.
Paris-based Genset had been seeking to sell the division since late 2000, when it decided to refocus its activities on drug development and abandon its genomics research programs. That radical shift in strategy resulted in a reduction in its worldwide work force from around 530 then to 448 by the end of 2001, and a further 194 jobs will go with the sale of Oligos. That will leave Genset with 254 employees, 48 of whom are employed at the San Diego headquarters of its U.S. subsidiary, Genset Corp.
The sale of Oligos is viewed as a positive move by the French stock market, since it prompted a 25 percent jump in Genset’s share price in the following days, despite the fact that Oligos generated virtually all the company’s revenues last year. In effect, while Genset’s total turnover fell to EUR19.5 million in 2001 from EUR29.8 million the year before, its sales of oligonucleotides jumped 44 percent, from EUR12.5 million in 2000 to EUR18 million in 2001.
Genset’s cash position has been strengthened not only by the sale of Oligos but also by two other developments. It has sold its 10 percent stake in Ceres, the Los Angeles-based plant genomics company, for EUR15 million, and has secured the agreement of the French stock market watchdog, the COB (Commission des Opérations de Bourse), and its own shareholders to an equity line arranged with the French bank Société Générale. The equity line comes into effect this month and could be worth EUR30 million to Genset over two years.
The asset sales and the equity line have considerably strengthened Genset’s financial position, CEO André Pernet said. “We now have the resources necessary to finance our research autonomously for more than two years,” he told a conference in Paris, pointing out that the company has cash and liquid assets of EUR92 million, a figure that includes the EUR30 million equity line as well as the proceeds of the sale of Oligos and the Ceres stake.
Chief Financial Officer John Varian said the funds “will provide Genset with the cash to allow us to prove that our change in strategy can deliver a pipeline of potential drugs.”
The primary focus of Genset’s R&D activities now is the development of its anti-obesity drug candidate, Famoxin, which is due to enter clinical trials around the middle of this year. The publication in February 2001 of preclinical data demonstrating the drug’s efficacy in mouse models sent the company’s share price soaring to over EUR60, although the euphoria did not last long. The price subsequently tumbled to the lowest level in its history, and even after the latest rally, Genset shares currently are trading at only about EUR7.20.
The company recently released the results of further studies carried out on Famoxin in 2001, which demonstrated that it also has potential in diabetes. As Pernet was quick to point out, this considerably boosts the ultimate commercial potential of the compound, and the company now is focusing more on this indication than on obesity. That said, the large-scale Phase I trial will test the drug in both indications, obesity and diabetes. The trial will be carried out on moderately obese patients and will probably be conducted in France.
Pernet said the company is planning to capitalize on the results as quickly as possible. “Our objective is to sign a licensing agreement for Famoxin with a pharmaceutical company before the end of 2002,” he said, adding that this would further strengthen the company’s financial situation.
Genset also is negotiating licensing agreements with third parties covering products in its bank of 4,000 secreted proteins that do not have therapeutic potential in its two fields of metabolic diseases and the central nervous system. Pernet said he expects to conclude protein licensing agreements with one or more companies in the first half of 2002.
The equity line put in place by Société Générale provides for the Paris-based bank to purchase shares of Genset stock over the next two years at times determined by Genset. A complex formula will be applied to determine the quantity and value of shares issued to the French bank, based on reference periods of five consecutive trading days selected by Genset. Depending on the price and volume of shares traded on the Nouveau Marché in Paris during those periods, Société Générale will purchase between 5,000 and 125,000 Genset shares at the end of each period. Provided the share price on the fifth day of the period exceeds the average trading price during the period, Société Générale will purchase between 5 percent and 15 percent of the number of Genset shares traded during the reference period and will pay a price equal to 90 percent of the average weighted market price of the shares during the period.
The agreement provides for Genset to issue shares to a minimum value of EUR5 million and a maximum value of EUR20 million initially, but that ceiling will be increased to EUR30 million provided Genset satisfies its minimum commitment and that its share price averages over EUR6 during a period of three months. Société Générale will probably resell all the subscribed shares on the market, but is not allowed to sell any during a reference period.