By Brady Huggett

Antigenics Inc. entered a definitive agreement to acquire Aronex Pharmaceuticals Inc. in a stock-for-stock transaction valued at $28.6 million in a move that will give Antigenics four additional oncology products and will provide Aronex stockholders with an upside.

Each outstanding share of Aronex stock will convert into the right to receive approximately $1.10 in shares of Antigenics stock. Aronex stockholders will not receive greater than .0917 shares or less than .0550 shares of Antigenics common stock for each of their Aronex shares. Also, each share of Aronex stock could be worth an additional 15 cents, based on the achievement of a 15-month FDA approval for Aronex¿s plagued but enticing product, Atragen.

Some might say that New York-based Antigenics is getting a steal by acquiring a company with four solid oncology products in clinical trials, including Atragen. But not its chairman and CEO Garo Armen.

¿Not at this price,¿ Armen said. ¿We are getting a fair consideration for what they are. If Atragen were already approved, the price would be higher. But we have to put in a significant amount of effort to get it approved. It¿s not a slam dunk and it¿s not going to happen in six months.¿

Armen said Antigenics would hire several Aronex employees willing to make the move from Texas, but he said Aronex CEO Geoffrey Cox expressed an interest in pursuing other activities.

Although Armen said the acquisition is about Aronex¿s total oncology package, Atragen ¿ a liposomal formulation of all-trans-retinoic acid ¿ is the product with the highest profile and most interesting history. Aronex, of The Woodlands, Texas, filed a new drug application for injectable Atragen, for patients with acute promyelocytic leukemia, in December 1998. In August 1999, the FDA said the Oncologic Drugs Advisory Committee would not review Aronex¿s new drug application because of deficiencies in the NDA. Aronex¿s stock (NASDAQ:ARNX) fell 35 percent, to $4.50.

One month later, the FDA sent a letter to Aronex explaining the issues preventing approval. The letter caused another 20 percent stock price drop. Aronex filed an amended NDA in July 2000, including data on 116 patients instead of the original 59. Next came the non-approvable letter in January that sent Aronex¿s stock down 73 percent, ending the day at $1.218. (See BioWorld Today, Aug. 6, 1999; Sept. 27, 1999; July 7, 2000; and Jan. 9, 2001.)

Aronex¿s stock rose 20 percent Tuesday, closing at $1.02.

But for all the doom on the market, it seems the problem with Atragen isn¿t with efficacy or safety. The problem is with the patient population.

Aronex ¿didn¿t correctly identify [the population] with the FDA,¿ Armen told BioWorld Today. ¿It is there, it is just a question of us identifying them and profiling them to the FDA. We have already met with the FDA and feel comfortable with what we can do to keep this thing moving.¿

Armen said even if the existing data for Atragen doesn¿t appease the FDA and Antigenics is required to do a small trial for additional figures, the target date for market approval is still by the end of next year.

Nyotran, Aronex¿s product for systemic fungal infections, is in Phase III trials, and Armen said Antigenics will file an NDA early next year. Antigenics also gets Aroplatin, a platinum product for solid tumors, and Annamycin, an anthracycline for solid tumors and hematological malignancies, both in Phase II. Armen said those products were slated for a 2005 market introduction.

For Aronex, the upside is coupling with an attractive partner and providing value for its stockholders. While Cox, the Aronex CEO, conceded that the non-approvable letter hurt the company financially, the deal with Antigenics is the silver lining.

¿[The letter] obviously impacted our market price and our ability to support our programs,¿ Cox told BioWorld Today. ¿But I¿m very happy with Antigenics as a merger partner. We feel this is the way in which we can give our investors the best opportunity going forward with the programs we have. We think this is the best deal all around.¿

The oncology products also solidified what Antigenics has been saying all along, Armen said.

¿We have always signaled to the marketplace that we want to be a full cancer company to North America,¿ he said. ¿This very much complements that strategy.¿

Antigenics¿ stock (NASDAQ:AGEN) moved up $1.70 cents Tuesday, to close at $17.25.

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