By Randall Osborne
As the trend marches on for big pharmaceutical companies to gobble up promising biotechnology firms, Pharmacia & Upjohn (P&U) signed an agreement with Sugen Inc. to purchase the cancer-drug developer for $650 million.
Under the terms of the deal, each of about 23.5 million shares of Sugen stock will be exchanged for about $31 of P&U stock, as long as the price of P&U stock is between $60.16 and $49.22 at the close of the transaction.
Sugen stockholders are assured no less than .515 share, and no more than .630 share, of P&U stock for each share of Sugen stock, although the exact exchange ratio will be based on the average price of P&U stock before the agreement closes.
¿[The merger] grew out of an interest on the scientific side,¿ said Paul Fitzhenry, spokesman for Bridgewater, N.J.-based P&U. ¿We were looking for some research collaborations.¿
Sugen is focused on identifying the cell-signaling targets called kinases and phosphatases, abnormalities in the functions of which can lead to cancer and other diseases. The company develops therapies using small-molecule inhibitors to regulate signaling pathways.
¿We had a smaller program [in kinases and phosphatases], so we were attracted to that program,¿ Fitzhenry said.
Sugen¿s SU5416, an angiogenesis inhibitor, will enter Phase III trials later this year for lung cancer and colorectal cancer, and is in an open-label Phase II study in AIDS-related Kaposi¿s sarcoma. In March, the company raised $28 million through a private placement. (See BioWorld Today, Jan. 14, 1999, p. 1 and March 23, 1999, p. 1.)
Another product, SU101, a small-molecule inhibitor of platelet-derived growth factor receptor, is in a pivotal study in glioblastoma, which is expected to yield interim data later this year. Also this year, the drug is expected to enter a pivotal study to treat pain associated with hormone-refractory prostate cancer. SU101 is in Phase II trials in ovarian and non-small cell lung cancers.
SU6668, a multi-mechanism inhibitor of angiogenesis and tumor growth, is in Phase I trials for treatment of solid tumors.
For P&U, Sugen¿s platform of cystostatic agents ¿ which block the growth of tumors ¿ supplements P&U¿s push in cytotoxics, hormonals and adjuvant therapies.
On completion of the merger, Sugen will stay in South San Francisco, where it is based. Peter Hirth, the company¿s vice president and chairman of the research and development, will become president of Sugen.
¿He will be the link to our senior management,¿ Fitzhenry said.
Hirth said SU5416 ¿could be on the market next year¿ for AIDS-related Kaposi¿s sarcoma. For the other indications, ¿you have to add at least two years, depending on accrual and how it all goes,¿ he added.
The deal with P&U lets Sugen push ahead with the earlier-stage SU6668, Hirth said.
¿It¿s being developed as an oral drug from the get-go,¿ he said. While the FDA was somewhat conservative in helping to design studies for SU5416, the agency has been more liberal with the dose-escalation trials for SU6668, allowing significant boosts in dosage that have shown no adverse effects.
Fitzhenry said the deal is expected to be completed by the end of the third quarter. It is subject to approval by the boards of both companies, stockholders and regulatory authorities. If the agreement is terminated, P&U has the right to buy up to 19.9 percent of Sugen¿s stock, and is entitled to a fee of $17 million.
The agreement was disclosed Tuesday after the markets closed. At midday Wednesday, Sugen¿s stock (NASDAQ:SUGN) was trading at $29.062, up $6.562. P&U¿s shares (NASDAQ:PNU) were trading at $54.437, down $0.25.