By Mary Welch

In a deal worth more than $38.5 million to NeXstar Pharmaceuticals Inc., the company and SKW Americas Inc. formed Proligo LLC to provide a full range of nucleic acid-based products for the growing oligonucleotide marketplace.

"Basically, NeXstar renamed its NeXstar Technology Products division Proligo LLC, and then sold 51 percent of the company to SKW Americas Inc. for $15 million in cash, $3 million in guaranteed payments and up to $20.5 million in performance-based milestone payments over the next five years," said Anna Sussman, manager of investor relations at NeXstar.

Proligo, which along with NeXstar, is based in Boulder, Colo., will retain the division's 27 employees. Wolfgang Pieken, who headed the technology products division, was named CEO of Proligo.

SKW Americas., of Buffalo, N.Y., is a subsidiary of SKW Trostberg AG, of Trostberg, Germany, a specialty chemical manufacturing company with annual revenue of more than $3 billion.

Last week, SKW Americas bought a 58,000-square-foot manufacturing plant from PerSeptive Biosystems GmbH of Hamburg, Germany, and renamed it Proligo Biochemie GmbH. SKW then incorporated the purchase into its Proligo deal with NeXstar.

"Essentially, the new company, Proligo LLC, starts out with the assets of NeXstar Technology Products, manufacturing plants in Boulder and Hamburg, and $10 million in cash," Sussman said. "Proligo is off and running, and is now in the market of manufacturing nucleoside phosphoramidite monomers, the basic building blocks of oligonucleotides, or RNA and DNA."

The new company will manufacture bulk, active oligonucleotides, chemical building blocks for oligonucleotides, and processing reagents for the efficient assembly of oligonucleotides. It will offer new synthetic linking technologies for modulating the activity of oligonucleotides, along with cost-effective processes for large quantity products made from such compounds, including the Product Anchored Sequential Synthesis (PASS) technology.

"The materials will be used in the field of genomics, as a diagnostic product or as a ribosome or optimer-based therapeutic," said Katie Doherty, spokeswoman for NeXstar. The company maintains that the combined resources will enable Proligo to become the only supplier of a truly integrated line of products and manufacturing services in nucleic acid chemistry.

For NeXstar, the deal has many advantages, particularly economic. The technology products division was started in December and for the six-month period following its inception racked up revenues of about $300,000, said Patrick Mahaffy, president and CEO.

"With this deal, we move about 30 employees off our payroll as well as about $5 million to $6 million in yearly research and development costs," he said. "However, by owning 49 percent of Proligo, we still are well positioned to receive the benefits of Proligo. With the technical expertise and financial support to Proligo given by our friends [at] SKW, Proligo will benefit more than [it would have if NeXstar had continued operating] the division on our own."

As part of the deal, Proligo will manufacture aptamers for NeXstar's use in drug discovery and development programs. NeXstar will retain certain rights to the PASS technology for its own uses, agreeing to provide certain transitional services to Proligo for up to nine months.

NeXstar Pharmaceuticals' stock (NASDAQ:NXTR) closed Monday at $8.937, down $0.312. *