By Randall Osborne

West Coast Editor

To create what the firms hope will become an immunotherapy powerhouse, Corixa Corp. said it has agreed to take over Coulter Pharmaceuticals Inc. by the end of the year in a stock swap valued at more than $900 million.

The price is based on the exchange of 1.003 shares of Seattle-based Corixa stock for each outstanding share of Coulter, of South San Francisco, at the time of closing. Corixa (NASDAQ:CRXA) closed at $44.187 Friday, and Coulter (NASDAQ:CLTR) ended the day at $30.937. Corixa has 21 million shares outstanding, and Coulter has 17.11 million, meaning Coulter would own about 44 percent of the combined company.

"It's really a smart deal," said Thomas Dietz, analyst with Pacific Growth Equities. "Coulter shareholders are getting a premium on their investment today, but upside from Bexxar in the future will still be afforded them through their Corixa ownership."

Subject to shareholders' approvals and the customary Hart-Scott-Rodino waiting period, the merger is expected to close in December, and the new company will continue to operate as Corixa, with current chairman and CEO Steven Gillis keeping those positions.

Coulter's lead product, Bexxar, is an antibody specific to the CD20 antigen on B cells conjugated to radioactive iodine-131. It attaches to a protein found only on the surface of B cells, including non-Hodgkin's lymphoma B cells. A Phase III trial in non-Hodgkin's lymphoma patients has been completed, and the company in September submitted its biologics license application (BLA) to the FDA for the second time.

The agency had asked for a modified BLA, and about eight months later, Coulter's partner, SmithKline Beecham plc, returned to Coulter all development and commercialization rights to Bexxar outside the U.S. (See BioWorld Today, April 26, 2000.)

Coulter has regained its ground on Wall Street, Dietz said.

"This is about where Coulter was trading the first time it brought the product this far," he said, adding the stage in Bexxar's progress is "perfect" for the Corixa deal.

"This is when you either decide to buy more products and fill the pipeline, or wait and get Bexxar approved," Dietz said. "A lot of companies are trying to fill their pipelines, and it's not that easy. Shareholders are going to hold you to [an accustomed] earnings level."

Gillis told BioWorld Today he is optimistic about Bexxar, the buying of which - along with sales force to market it - was the main gain in the Coulter deal.

"The FDA has another month to decide whether to accept the re-submitted BLA and begin the priority review," he said. "We're not expecting any second refusal-to-file letter, but we don't make a business out of telling the FDA what to do, and we have some protection in the [merger] agreement."

Coulter's therapeutic antibodies program includes an interferon receptor antagonist, and first efforts in the targeted oncologics program are based on tumor-activated prodrug and tumor-specific targeting technologies like Bexxar uses, which provides a "leg up in technology," Gillis said. "This is obviously an antibody deal."

Corixa, for its part, said late last month it will file a BLA for its melanoma vaccine, Melacine, in the second quarter of 2001. The vaccine consists of lysed, or broken, cells from two human melanoma cell lines combined with Corixa's proprietary Detox adjuvant, which includes monophosphoryl lipid A adjuvant and mycobacterial cell wall skeleton, both of which activate the human immune system when deployed in vaccination. (See BioWorld Today, Sept. 28, 2000.)

To advance its PVAC injectable psoriasis treatment, Corixa has joined with Medicis Pharmaceutical Group, of Phoenix, which will pay license fees, research funding and milestones. Phase II trials for moderate to severe psoriasis with the drug, which is derived from Mycobacterium vaccae, are expected to finish by the end of this year. PVAC was developed by Corixa with New Zealand-based Genesis Research and Development Corp. (See BioWorld Today, Aug. 17, 2000, p. 1.)

The merged firm will have 16 programs in clinical development, 22 preclinical programs and 16 corporate partnerships focused on autoimmune diseases, cancer and infectious diseases.

Dietz said Monday he had been "talking to dozens of people this morning, since about four o'clock," and even the small initial skepticism soon disappeared.

"Many people are used to distress deals," he said. "They have a lot of questions because they don't understand it. But [Corixa and Coulter] are getting together to build something a lot bigger and a lot faster. This is the kind of merger people should be driving toward in this business."

Michael Bigham, Coulter's president and CEO, will join Corixa's board of directors as vice chairman.

"What Bigham and his team get is a discovery engine they didn't have, and a chance to make it a revenue-multiple story right away," Dietz said.

Stock prices Monday reflected the planned merger. Corixa closed Monday at $39.687, down $4.50. Coulter ended the day up $3.94, or 13 percent, to $34.875.

"They're trading so the ratios go in," Dietz said. "It happens almost immediately."

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