By Randall Osborne

Following the trend of drug discovery companies pairing up with combinatorial chemistry firms, one subsidiary of Interneuron Inc. is buying out another for $15 million worth of stock.

Intercardia Inc., of Research Triangle Park, N.C., has signed a letter of intent to acquire Transcell Technologies Inc., of Monmouth Junction, N.J. Both companies are majority-owned subsidiaries of Lexington, Mass.-based Interneuron.

Intercardia is developing drugs for cardiovascular disease. Transcell, a combinatorial chemistry company, produces libraries of synthetic carbohydrates and glycoconjugates. In the transaction Transcell becomes a division of Intercardia.

Under terms of the letter of intent, Transcell shareholders will receive Intercardia stock in three installments with an aggregate market value of $12 million. The first installment, worth about $6 million, will be made at the closing of the transaction, probably in the first quarter of next year.

"This is really quite a nifty little deal," said William Boni, vice president of corporate communications at Interneuron. "We're maintaining our majority ownership in Intercardia and, through it, a significant interest in Transcell. We don't feel we're giving up anything."

The number of Intercardia shares to be received by Transcell shareholders at the initial closing will be determined by Intercardia's stock price during the week before. The minimum price for determining the number of shares received will be $9 per share, and the maximum will be $25 per share.

The second and third installments will consist of about $3 million each of Intercardia stock, as valued at each date, and will be issued 15 and 21 months after the initial closing.

Intercardia will issue stock options with a current market value of $3 million to $4 million to Transcell employees, and will issue $3 million of Intercardia stock to Interneuron for technology related to Transcell that is owned by Interneuron.

At closing, Intercardia and Interneuron will incur charges to operations of $6 million to $8 million as a result of the transaction, and additional charges related to the stock options issued.

Transcell's Drug Discovery Attracting Attention

By keeping the alliance of drug development with combinatorial chemistry under the same umbrella company, everybody wins, Boni said. "One of Intercardia's key strengths is its business partnering and drug development, and that's going to stand Transcell in good stead."

At the same time, Transcell's combinatorial technologies "have been validated externally recently" and will provide a boost for Intercardia when acquired, Boni noted. In July, Transcell collaborated with Merck & Co. Inc., of Whitehouse Station, N.J., in a deal worth up to $48 million. The initial efforts will be toward discovery and biological evaluation of analogues of two antibacterial compounds. (See BioWorld Today, July 8, 1997, p. 1.)

Intercardia will pay Interneuron a royalty on products that may result from the Merck collaboration.

W. Bennett Love, vice president of corporate planning and communications at Intercardia, said the Merck collaboration will "move forward as rapidly as we can." He said Clayton Duncan, Intercardia's president and CEO, played a strong part in Transcell's negotiations with Merck, as a member of Transcell's board of directors.

Bextra Targets Congestive Heart Failure

Intercardia's lead product, Bextra (bucindolol HC1), a vasodilating beta blocker, is in Phase III clinical trials for congestive heart failure. Two thousand patients are enrolled at about 90 sites. The primary endpoint is mortality.

A safety monitoring board is examining the data periodically and could stop the trials when enough data have been gathered, Love said.

"We don't think [the trials] will run the full term," he said, although when they might conclude is "the multimillion-dollar question." Love estimated the trials would finish in the next nine to 12 months, and Boni said a new drug application would be filed with the FDA six to nine months later.

The buyout of Transcell provides Intercardia with a plan for following up Bextra with more products, Love said. "Once it works, stockholders will ask us, 'What are you going to do next?' This is what we're going to do next."

Intercardia's subsidiary, Aeolus Pharmaceuticals Inc., is developing small molecules for cardiopulmonary disease and disorders caused by excess oxygen free radicals, Boni said. Aeolus, of Research Triangle Park, is working on drugs for cardiomyopathy, respiratory distress syndrome in adults and neonatal patients, and stroke.

"It's very early stage," Boni said, and Transcell's technology should help move the programs along.

Interneuron has two other subsidiaries: Progenitor Inc., of Menlo Park, Calif., which works in developmental genomics; and InterNutria Inc., of Lexington, Mass., which is focused on dietary supplements.

Intercardia's stock (NASDAQ:ITRC) closed Thursday at $24.25, up $0.50. Interneuron's (NASDAQ:IPIC) closed at $11.562, unchanged. *

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