By Randall Osborne

West Coast Editor

Adding bioinformatics weaponry to its drug discovery arsenal ¿ not to mention a stockpile of cash ¿ Exelixis Inc. signed a definitive agreement to buy Genomica Corp. for $110 million in a stock-for-stock transaction.

Boulder, Colo.-based Genomica had $110.8 million in cash, cash equivalents and investments as of September 30, and George Scangos, president and CEO of Exelixis, said that was a major consideration in acquiring the firm.

¿They have a lot of cash, and we¿re paying in stock about what their cash balance is,¿ he told BioWorld Today. ¿If you look at it as a financing solely, then we were able to do it at market, with no discount and no fees. But we do get the software, and the software does have value.¿

Built into the deal is the requirement that Genomica must have cash, investments and receivables of at least $108.75 million at the time of closing.

¿We do not intend to get into the software business, let¿s be clear about that,¿ Scangos said during a conference call, adding that Genomica¿s software ¿is, among other things, very good for handling data in human populations,¿ and will be deployed internally.

Using the software externally could be an ¿additional upside, but we¿re not counting on any of that,¿ he added.

Exelixis, of South San Francisco, aims to merge Genomica into a wholly owned subsidiary, with closing of the deal on or about Dec. 27, subject to regulatory approval.

¿We do not intend to hire a substantial number of those people,¿ Scangos said. ¿If there are a small number that want to move to San Francisco, we will look at that to see if that¿s a reasonable option.¿

Both companies¿ boards of directors have given unanimous approval, and Genomica officials have agreed to tender their shares in the deal, which is expected to qualify as a tax-free reorganization.

Exelixis said it will commence the offer for all of Genomica¿s outstanding shares on or about Nov. 27, and the offer period will run for 20 business days unless extended by Exelixis. The back end of the merger is expected to wrap up during the first quarter of 2002.

The average trading price during the initial offer period will determine the ultimate exchange ratio for Genomica stockholders, based on the average closing price of Exelixis stock for 18 trading days, up until two trading days before closing.

Details are complicated, but the exchange ratio of Exelixis stock for outstanding shares of Genomica will be decided by a formula ¿ $110 million in common stock of Exelixis, divided by the average trading price for the 18 business days ending two days prior to the closing of the initial offer period, and then further divided by the number of shares of Genomica outstanding (including Genomica stock options with exercise prices of $5 or less).

Provided all this, the average trading price of Exelixis common stock shall not be less than $13.30 in determining the exchange ratio, so the maximum number of shares of Exelixis stock issued will not exceed about 8.27 million shares.

¿It¿s basically to get the deal done at market,¿ Scangos said. ¿We wanted to capture value if we go up before the close of the tender offer. What we¿re saying basically is, it¿s the average price during those [20] days.¿

After the exchange offer comes the merger, in which Exelixis will acquire, at the same exchange ratio, the remaining shares of Genomica stock.

Focused on comparative genomics and model system genetics, Exelixis works in multiple fungal, nematode, insect, plant and vertebrate areas, and recently entered deals with Scios Inc., of Sunnyvale, Calif., and Elan Corp., of Dublin, Ireland. (See BioWorld Today, Aug. 15, 2001, and Oct. 9, 2001.)

Genomica develops and markets software products and services, with customers that include the likes of GlaxoSmithKline plc, of London, and Celera Genomics Group, of Rockville, Md.

Exelexis¿ stock (NASDAQ:EXEL) fell 44 cents on the news, closing at $14.80 Tuesday, but Genomica¿s shares (NASDAQ:GNOM) ended the day up 21 percent, or 73 cents, closing at $4.11.