By Lisa Seachrist
WASHINGTON — Amersham Pharmacia Biotech is merging with bioinformatics specialist Molecular Dynamics Inc. for $256 million.
The deal, which is a straight stock purchase, is expected to be completed by early October. Amersham Pharmacia Biotech will initiate a cash tender offer of $20.50 per share for Sunnyvale, Calif.-based Molecular Dynamics stock, pending shareholder and regulatory approval.
The purchase will firmly place Amersham as a major player in the burgeoning bioinformatics field and enhance Molecular Dynamics' ability to market its sequence analysis software.
"We think this deal is a very good value for the money," said Nicola Smith, vice president for corporate affairs for London-based Nycomed Amersham plc. "Amersham has a worldwide distribution system that will allow us to take the technology a lot further than Molecular Dynamics could on its own."
Investors, too, are excited about the merger as Molecular Dynamics' stock (NASDAQ:MDYN) leapt 34 percent from $15 to close at $20.063 Monday.
Molecular Dynamics and Amersham Pharmacia Biotech entered into a collaboration in 1994 to bring together Amersham Pharmacia Biotech's molecular biology skills and Molecular Dynamics' instrumentation and software expertise. The alliance was aimed at developing and marketing complete DNA sequencing and genomic analysis systems. The result is MegaBACE, a high-throughput DNA sequencing system that has been on the market for a year in North America, Europe and Japan.
Smith said by combining operations, the companies expect to accelerate commercialization of this system as well as a microarray system for high-throughput analysis of gene expression. Ultimately, the microarray technology allows companies to conduct high throughput screens of the effect of certain drugs on gene expression in certain tissues and diseases.
"In some ways, understanding the differences in gene expression is where all this sequencing effort is taking us," Smith said.
In addition, Smith added the merger will allow Amersham Pharmacia Biotech to provide extensive technical support to customers.
"One of the traditional features of our business has been our technical support capabilities," Smith said. "We work with our customers to help them tailor the system to their own specific needs."
Merger Sparks Heightened Interest In The Field
David Crossen, an analyst with NationsBanc Montgomery Securities in San Francisco, said Amersham Pharmacia Biotech's entry into bioinformatics could raise the interest in the field.
"I think it will become more competitive as a result of this merger," Crossen said. "It could be the impetus for Perkin Elmer to get more involved."
Amersham Pharmacia Biotech is a joint venture of Nycomed Amersham plc and Pharmacia & Upjohn, both of London. The venture is headquartered in Uppsala, Sweden, and is the result of a June 1997 merger of the two companies' life sciences divisions to create a major biotechnology and biomedical research supply company. Nycomed Amersham controls 55 percent of Amersham Pharmacia Biotech, while Pharmacia & Upjohn controls the remaining 45 percent.
Under terms of the merger with Molecular Dynamics, Amersham Pharmacia Biotech's net cash cost to acquire shares it doesn't already own and canceling share options will total $199 million. Amersham Pharmacia Biotech has held 1 million shares of Molecular Dynamics stock since 1994.
Smith said the acquisition will be financed through existing bank facilities. *