LONDON Shield Diagnostics Group plc, of Dundee, Scotland, and Axis Biochemicals ASA, of Oslo, Norway, said they will merge, creating a specialist in cardiovascular disease prediction with a market capitalization of #177 million (US$293 million).
The merger will be effected through the issue of one new Shield ordinary share for one Axis ordinary share. This will leave existing Shield shareholders with 62 percent of the enlarged share capital and Axis shareholders with 38 percent. At Friday¿s closing prices, Shield had a market capitalization of #109 million and Axis, #62 million.
David Evans, managing director of Shield, told BioWorld International the deal creates ¿an international force in cardiovascular diagnostics. We have complementary technology in homocysteine, and combining our technology will result in more rapid growth of the homocysteine market.¿
The merged company is planning a fund raising for its future development, but Evans said it was still to be decided how much the firm will try to raise. Axis is listed in Oslo, and hopes to tap into the London and Oslo markets. The share price of Shield fell by 5 pence, to #5.15, when the deal was announced on Monday.
Both companies are in the process of commercializing new tests for the detection of cardiovascular disease, and Evans said operating as separate companies had significantly muddied the process of negotiating with potential partners. ¿There has been a lot of crossover of discussions, and now we can present one united front,¿ he said.
Shield has developed a range of products, including tests to measure Activated Factor XII (AFT) and homocysteine. Data presented to the American Heart Association meeting in Dallas last November confirmed AFT as a more potent indicator of cardiovascular risk than cholesterol, while recent research has indicated a link between elevated levels of the amino acid homocysteine and cardiovascular disease.
Axis also has developed a homocysteine assay. In October 1998, the company received FDA marketing approval. Following its launch at the end of 1997, the homocysteine test recorded sales that grew from #105,000 in the first quarter of 1998 to #500,000 in the third quarter of 1998.
The merged group will have a combined research and development budget of #3.25 million to #3.5 million annually. While the group will benefit from Axis¿ greater strength in innovative research, Evans said increasing the research and development budget ¿will not necessarily speed up development time scales. You can¿t speed these things up by throwing money at them,¿ he said.
Evans and his counterpart at Axis, Svein Lien, will act as joint managing directors, and will be based at Shield¿s offices in Dundee. The business will continue to operate from existing sites in Dundee, Oslo and Bodo, Norway. The combined company will have 190 employees. n