By Mary Welch
T Cell Sciences Inc. agreed to merge with Virus Research Institute Inc. (VRI), forming Avant Immunotherapeutics Inc. in a stock swap valued at about $150 million.
"It's a major opportunity to move forward," said Barrie Ward, chairman and CEO of Cambridge, Mass.-based VRI. "Together we have an extensive and convincing portfolio, strong global partners and an experienced management team."
Ward will become chairman of the new company, located at T Cell Sciences' site in Needham, Mass.
Under the terms of the agreement, expected to close this fall, T Cell Sciences will issue 1.55 shares of T Cell common stock for each share of VRI common stock. Based on this exchange ratio, T Cell and VRI shareholders will own approximately 66 percent and 34 percent of Avant, respectively.
Each warrant represents the right to purchase one share of T Cell common stock for $6 per share and expires in five years from the closing date. Boards of both companies have approved the merger, and stockholders owning more than 34 percent of VRI's shares have voted in favor of it.
T Cell Sciences' lead compound is TP10, soluble Complement Receptor 1 (sCR1), which inhibits complement activation. Complement is a family of immune system proteins that circulate in the blood and help identify and eliminate damaged tissue, contributing to the body's acute inflammatory response against disease, infection and injury.
Excessive complement activation has been implicated in acute respiratory distress syndrome, reperfusion injury following ischemic events, organ transplant rejection, multiple sclerosis, Alzheimer's disease, rheumatoid arthritis and lupus.
Last month, T Cell Sciences said results from a Phase I/II trial of TP10 for patients undergoing lung transplants showed the therapy was safe and well tolerated. The company is also working on a vaccine for managing atherosclerosis.
VRI is developing an infant rotavirus vaccine and an influenza vaccine. Late last year, the firm signed a deal with SmithKline Beecham plc of London to develop the rotavirus vaccine.. VRI's main collaborator, Pasteur Merieux Connaught, of Lyon, France, is partnering the development of the influenza vaccine, which uses as its delivery system a product called Adjumer, a synthetic derivative of the polymer polyphospazene, designed to boost a vaccine's ability to trigger immune response. (See BioWorld Today, Dec. 15, 1997, p. 1.)
VRI also is working on vaccines for Lyme disease, H. pylori infections and genital herpes.
Twelve Clinical Stage Programs In The Works
By the middle of next year, Avant will have 12 products — including TP10 and the vaccines — near or in clinical trials, as well as five strategic alliances with pharmaceutical partners: Novartis AG, of Basel, Switzerland; Yamanouchi Pharmaceutical Co., of Tokyo; Astra AB, of Sodertalje, Sweden; SmithKline; and Pasteur Merieux.
"Both [T Cell Sciences and VRI] are involved in finding products that harness the immune response to prevent and treat human diseases, so there is great synergy and technology," Ward said. "I think there is an opportunity to drive the products forward into the clinical stages."
He refused to say whether staff cutbacks would take place, but emphasized that the scientific teams would remain.
Thomas Dietz, an analyst with Pacific Growth Equities, of San Francisco, said the deal is happy news for VRI shareholders.
"Liquidity is always an issue and this improves the situation quite a good deal," he said. "VRI's management seems to be integral to the new company, and that's good. They'll have a broader pipeline of products and the value of that is clearly bigger."
Ward said competition for money is tough, and merging "seems like the sensible thing for a small company to do. You increase your visibility and you give yourself more research opportunities. I think it also gives you more credibility and clout in the marketplace."
As of March 31, T Cell Sciences had $9.43 million in cash, with a net loss for the quarter of $1.41 million. VRI had $1.16 million in cash, with a net loss of $2.3 million for the quarter.
Avant would have had about $25.9 million in cash as of March 31, on a pro forma basis.
Lehman Brothers, of New York, acted as financial advisors to T Cell Sciences in the deal. Hambrecht & Quist, of San Francisco, served in that capacity for VRI.
T Cell Sciences's stock (NASDAQ:TCEL) closed Tuesday at $3.546, down $0.703. VRI's shares (NASDAQ:VRII) ended the day at $4.687, up $1.25. *