By Kim Coghill
Washington Editor
Aurora Biosciences Corp.¿s stock jumped 37 percent Monday after it announced that Vertex Pharmaceuticals Inc. would acquire the company in a $592 million stock-for-stock transaction.
The merger, expected to close in the third quarter, will unite Aurora¿s assay development, screening and cell biology capabilities with Vertex¿s integrated drug discovery expertise to accelerate drug candidate output in target-rich gene families.
Aurora¿s stock (NASDAQ:ABSC) closed Monday at $23.20, up $6.35 or 37.69 percent, while Vertex¿s stock (NASDAQ: VRTX) closed at $38.56, down 69 cents or 1.76 percent.
¿This merger combines Aurora¿s biology capabilities with Vertex¿s Chemogenomics platform to create a drug discovery powerhouse,¿ Stuart J.M. Collinson, chairman, CEO and president of San Diego-based Aurora, said in a conference call Monday. ¿Each company brings to the merger a long history of successful partnerships with leading pharmaceutical companies, a strong intellectual property position, a track record of outstanding achievement by creative and highly respected people and a strong balance sheet.¿
Under terms of the deal, each share of Aurora will convert into shares of newly issued Vertex common stock at a fixed ratio of 0.62 shares of Vertex common stock for each share of Aurora common stock. Based on the closing price of Vertex stock of $39.25 on Friday, April 27, the fixed exchange ratio implies a price of $24.34 per Aurora share, a 44 percent premium to Friday¿s closing price of $16.85.
Vertex will issue about 14 million shares of common stock in exchange for Aurora¿s outstanding common stock, and Aurora options will be equitably converted to Vertex options. The transaction will be structured as a tax-free share exchange to be accounted for as a pooling of interests, the companies said.
The merged company will be named Vertex Pharmaceuticals Inc., and Aurora, slated to operate as a wholly owned subsidiary, will retain its name, said Lynne Brum, vice president of corporate communications and market development for Cambridge, Mass.-based Vertex.
The combined companies will be financially strong, Brum said, with about $800 million in cash and 800 employees. Aggregate revenue projections for the two companies in 2001 are upwards of $180 million.
Stephen Farinelli, research analyst with Merrill Lynch, of New York, said in a research note, ¿We think it is likely that the combination will increase the flow of drug candidates into preclinical and clinical development and will encourage further commercial alliances with large pharmaceutical partners. Overall, we think the merger makes good strategic sense for Vertex.¿
The companies will have one drug on the market, the HIV protease inhibitor Agenerase, and 12 drug candidates in clinical development targeting the treatment of viral diseases, cancer, autoimmune and inflammatory diseases and neurological diseases.
¿Vertex is in the unique position to successfully translate genomic discoveries into clinically and commercially important drugs,¿ Joshua Boger, Vertex¿s chairman and CEO, said during the conference call. ¿We have oriented our research approach to capture the small-molecule product opportunities of major, target-rich areas of the genome using a strategy of parallel drug design.¿
Vertex¿s approach, called Chemogenomics, is designed to accelerate drug discovery and capture large amounts of product-based intellectual property around highly promising targets, Boger said.
¿We are demonstrating that Chemogenomics works,¿ Boger said. ¿We are seeing the first drug candidates taking shape from this approach and our intellectual capture is increasing. We expect to advance five or more new drug candidates into development in 2001 including novel kinase and novel caspase inhibitors representing the first output.¿
The new challenge, Boger said, ¿is to expand into additional gene families, and the integration of Aurora technology will allow us to do that.¿
Collinson said Aurora¿s technologies and expertise in G protein-coupled receptors and ion channels will enable Vertex to rapidly wrap up drug discovery efforts in these areas.