By Matthew Willett

Sequenom Inc. plans to merge its genotyping technologies with Gemini Genomics plc¿s population-based gene data in a stock-swap deal valued at $238 million.

Shareholders in UK-based Gemini will own about 35 percent of the combined company.

The issuance of 12.9 million shares by Sequenom ¿ to be issued to Gemini shareholders at an exchange rate of 0.2 Sequenom shares for each Gemini share, or 0.4 shares of Sequenom for each Gemini American depository share ¿ will bring Sequenom¿s shares outstanding to 37.2 million. Sequenom also will issue 1.5 million options related to outstanding Gemini warrants and options.

SG Cowen Securities Corp. analyst Eric Schmidt said the merged company will be a competitor to be reckoned with in the genomics space.

The bottom line here is that I think Sequenom made a good acquisition at a fair price,¿ Schmidt said. ¿We do believe that Gemini probably has the industry-leading repository of genetic information associated with genetic, or familial, disease. That¿s a clear asset that fits hand in glove with Sequenom¿s leading platform in SNP analysis.¿

Company officials from both organizations cited synergies and expanded capacities as motivators for the merger, and both said their existing collaboration, established in April 2000, encouraged them.

San Diego-based Sequenom CEO Toni Schuh told listeners in a conference call Tuesday that the merger will build on the collaboration to discover and validate associations between SNPs (single nucleotide polymorphisms) and diseases.

¿Sometimes when you enter into a collaboration and it¿s very successful you¿ll look at that success and say, Do we have to share 50-50?¿¿ Schuh said. Then, he said, both companies realized they had an increasingly valuable opportunity and it ¿would make more sense to put the shops together.¿

Cambridge, England-based Gemini¿s CEO, Paul Kelly, said the companies recognized the potential of a combined entity.

¿Both parties had to sit up and say, If this is what¿s possible under a collaboration scenario, let¿s look at other scenarios where we can accelerate and ramp up discovery significantly,¿¿ Kelly said. ¿Really, the synergy of vision made it a very compelling combination.¿

The post-merger company, expected to be a reality after the transaction closes in the third quarter, will have a wide set of capacities and technologies. Gemini will contribute its population-based clinical data, a collection of clinical and medical information from human volunteers from a number of groups, such as twins, disease-affected individuals and founder-type populations.

Sequenom¿s strengths in genome-wide genetic analysis, especially its MassARRAY genotyping platform, will allow the merged company to more efficiently pursue therapeutic and diagnostic development through more rigorous, and earlier, validation, the companies said.

¿This merger with Sequenom supports a combination of technology and resources that will allow us to more effectively and rapidly mine a wealth of information,¿ Kelly said.

After the merger, the resulting company will have about $208 million in cash on hand. The combined company will be run by an eight-member board of directors, of which Sequenom¿s Helmut Schuhsler will remain chairman. Gemini¿s chairman, Michael Fitzgerald, will join the board, and Kelly will be appointed vice president and will lead Sequenom¿s Biotherapeutics division. The merged company will split its operations between that division and the Sequenom Genomics division.

The merged company will continue to go by the name Sequenom, and also will continue to trade under the symbol SQNM on Nasdaq.

Together, the companies have a disease gene patent portfolio of 11 patents and 89 patents pending. Their combined technology patent portfolio is 59 issued patents strong, and 96 more patents pending.

The merger, Schmidt said, could put the combined company at the head of its class of genomics companies that completed initial public offerings in the last year or so.

¿There were about 37 platform genomics companies that went public last year, and the goal for many of them is to move downstream to drug discovery and become the next Millennium [Pharmaceuticals Inc., of Cambridge, Mass.],¿ he told BioWorld Today. ¿Certainly, this acquisition gives Sequenom a much better opportunity to compete for the pole position. It puts them among the frontrunners in terms of recently public companies making a bid to move downstream to drug development.¿

Sequenom priced its IPO in February 2000, selling a total of 6.03 million shares at $26 each for total proceeds of $157.48 million, including the overallotment option. Gemini completed its IPO in July by selling 6 million American depository shares ¿ each ADS representing two shares ¿ at $14 each, and, with the overallotment option, raised $96.6 million. (See BioWorld Today, Feb. 2, 2000, and July 27, 2000.)

Sequenom reported revenues of $5.2 million in the first quarter compared to $1.6 million in the same period last year. Of that revenue, product sales accounted for $3.7 million. The company¿s net loss for the quarter was $7 million, or 29 cents per share.

Gemini reported a loss after taxation of $1.5 million in the quarter ending March 31. For the year ending March 31, Gemini reported a loss after taxation of $13.2 million, and revenue for the year was $1.6 million, with $1.5 million of it coming in the final quarter.

Gemini¿s shares (NASDAQ:GMNI) rose 45 cents Tuesday, or 8 percent, to close at $5.988. Sequenom¿s shares (NASDAQ:SQNM) fell 11 percent, or $1.93, to close at $15.75.