SYDNEY - Biotech International Ltd. has launched a A$15.7 million on-market takeover bid for Agen Biomedical Ltd. in order to achieve “critical mass“ to compete in the international biotechnology market.

Biotech, based in Perth, announced last week it formally bid A$0.22 cents a share for all the shares of Agen, in Brisbane, that it does not already own. Biotech bought a 19.7 percent stake in Agen late last year.

But the market promptly bid Agen's share price up to A$0.24 cents, and the directors of Agen, a manufacturer of diagnostic tests for human and veterinary diseases, warned shareholders not to sell pending a more considered response by the board. They also described the bid price as “disappointing.“

Biotech manufactures and sells high-temperature enzymes used in PCR technology and DNA sequencing - chemicals made under license from Hoffman-La Roche Ltd., of Basel, Switzerland. (See BioWorld International, Nov. 19, 1997, p. 3.)

Biotech also recently received court approval for its merger with another company, Resources and Industry Ltd., a company with A$14 million in cash reserves but no operating business.

In November, Biotech invested some of those considerable cash reserves by paying A$0.20 cents a share, or A$2.8 million, for nearly 20 percent of Agen.

At the time, Biotech Managing Director Sabila Sassine said his company bought the stake because it was available - another group decided to sell out - and to prevent a foreign company from buying Agen. He also commented that the move was not part of a takeover bid.

Last week, Sassine said the new offer price was 10 percent higher than the per-share price paid for Biotech's original stake, and at the higher end of Agen's trading range.

He said the biotechnology and pharmaceutical sectors would be the subject of rationalization at all levels, due to the increasing costs of research and development and regulatory compliance. The majority of Australian companies in those sectors are small by international standards, lack critical mass and are paying too much for regulatory compliance, quality assurance and corporate overhead.

A merger of Biotech and Agen would have considerable synergies, as both have pharmaceutical manufacturing operations in Brisbane and have research and development programs. The combined companies also would have much more financial muscle than two companies operating separately, Sassine said.

Agen's response to the on-market offer (any acceptances must be sold through a stock market broker, as opposed to an offer made directly to shareholders) was to tell shareholders to wait.

Agen directors are “disappointed“ at the offer and any shareholders who accept now would not benefit from any higher offer that might be made. The Agen board is planning to meet soon to give a more detailed response to the offer, Sassine said. *

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