By Mary Welch

V.I. Technologies Inc. acquired Pentose Pharmaceuticals Inc., a private company that develops viral inactivation products, in a stock transaction worth about $45 million.

Pentose shareholders will own about 34 percent of the outstanding shares of the combined companies. V.I. Technologies (also known as Vitex) expects to write off a portion of the transaction costs as in-process research and development. The merger should close in the fourth quarter. Currently there are 12 million shares of Vitex¿s stock outstanding; after the merger, there will be 18 million outstanding shares.

¿It was a natural fit and a natural outgrowth of a relationship between Pentose and Vitex that has been ongoing for about a year,¿ said Martin Williams, vice president of business development and sales and marketing for Pentose. ¿Vitex has experience, partners and revenues. They are cash positive. We, as a development company, are burning cash.¿

John Barr, president and CEO of Vitex, said the merger ¿gives us ownership of existing technology and broadens our market. The more we worked with them and saw their technology, we more excited we got.¿

Pentose, of Cambridge, Mass., started working with Vitex in November 1998 in a $12 million deal to develop a means of enhancing Vitex¿s viral elimination method for pooled plasma products.

Vitex, based in Melville, N.Y., said its PLAS+SD was the first FDA-approved viral inactivated blood product. Approved by the FDA in May 1998, PLAS+SD is a solvent detergent plasma that removes all enveloped viruses, such as HIV, hepatitis B and human lymphotrophicvirus. The process, however, doesn¿t neutralize viruses that don¿t have a lipid envelope surrounding them, such as parvoviruses.

That¿s where Pentose comes in because it is developing Inactine, a technology that inactivates viruses in all classes of viruses known to infect blood ¿ both enveloped and non-enveloped viruses. Inactine products are small, electrophilic molecules that selectively bind and irreversibly modify DNA and RNA, thus preventing viral replication without altering proteins or cells that have critical therapeutic value.

The two companies have been collaborating to see if applying the Inactine technology along with PLAS+SD provides a one-two punch in the viral inactivation process.

Pentose¿s Inactine technology in red blood cells will start Phase I trials next month. Although some 30 million units of red blood cell concentrates are transfused into patients around the world, there are no available methods for effectively inactivating viruses in this blood product. The company estimates that a $3 billion market is awaiting a viral inactivation treatment for red blood cells.

¿Our technology is complementary,¿ Barr said. ¿But they have technology in the biggest market ¿ red blood cells ¿ that is better than anything else out there. We have the first FDA-approved blood inactivation system for transfusion plasma, but they have it for the two other areas ¿ platelets and red blood cells. It gives us a broader range of viral kill.¿

In fact, Vitex, which has a collaboration with Pall Corp., of East Hill, N.Y., to inactivate red cells and platelets, essentially will replace its work with Pentose¿s.

¿We believe Pentose¿s technology is a more cost-effective solution and has a faster path to commercialization,¿ Barr said. ¿We will essentially be discontinuing our internal program in favor of Pentose¿s work and technology.¿

Pall funds half of the ongoing research and development expenses and has made equity investments in Vitex tied to developmental achievements. The next milestone is a successful filing on an investigational new drug (IND) application for a red cell viral inaction product.

In addition to its Inactine technology for red blood cells, Pentose was exploring the applicability of Inactine compounds to eliminate viruses in a variety of blood and blood products, including red cells, platelets, transfusion plasma, plasma derivatives, biopharmaceuticals and blood collection tubes. The company has an agreement with Cangene Corp., of Mississauga, Ontario, to develop the use of Inactine compounds in conjunction with existing viral inactivation steps used in the manufacture of Cangene¿s hyperimmune products.

Pentose¿s president and CEO, Samuel Ackerman, will become executive vice president for research and development and will join Vitex¿s board of directors. Ackerman was the former director of the IND division of the FDA Center for Biologics Evaluation and Research.

Also as a result of the merger, Vitex¿s scientific founder, Bernard Horowitz, will transition into a consulting role but will remain on the board.