By Randall Osborne
On the upswing from a financing in May, Receptagen Ltd. has drawn the attention of a Singapore-based company with which it plans to merge.
Receptagen, of Edmonds, Wash., has signed a letter of intent to acquire all shares of Scitech Genetics Ltd., of Singapore. If shareholders and company directors approve, Receptagen will acquire the shares for $21.6 million by issuing common stock to Scitech's current shareholders, thus giving them control of the new company, which will take the Scitech name.
A general shareholders' meeting will be held in November, and the merger could be complete by Dec. 1, said Joseph Baba, Receptagen's director of investor relations. "To me, it's a Cinderella story," he said. "It could not have ended any better than it did."
The company also plans to offer by the end of the year at least $10.8 million in stock through Credifinance, a wholly owned subsidiary of InterUnion Financial Corp., of Palm Beach, Fla., which represented Receptagen in the merger. Burrill & Co., of San Francisco, represented Scitech. Terms of the offering will be announced later.
Through a Canadian special warrants offering in May, which let the troubled company proceed without showing a prospectus up front, Receptagen raised $900,000 from institutional investors, Baba said. Another $900,000 is expected in a week or two as the second half of the offering.
Money from the financing is "a breath of fresh air" for Receptagen, which had $497,008 in cash at the end of the second quarter, Baba said. "[The special warrants offering] got us back on our feet in such a fashion that we were able to attract a company such as Scitech."
The new Scitech will keep Receptagen's Toronto Stock Exchange listing but will take a new symbol, yet to be determined.
Scitech, founded in 1988, develops, produces and markets six of the best-selling pharmaceutical products in the Asia-Pacific region, which is "quickly becoming the fastest growing market in the world," Baba said.
The company sells human growth hormone in Korea and has received regular approval to sell in other areas in the Asia-Pacific region, except Japan. Regulatory approval is expected for a diphtheria, acellular pertussis and tetanus vaccine, and all clinical trials have been completed for Scitech's third-generation hepatitis B vaccine. The company also has entered late-stage trials of a vaccine that combines the two.
Scitech plans to apply by the year 2000 for regulatory approval for recombinant human insulin and for its own alpha interferon 2a and 2b.
The first order of business after the merger, Baba said, will be "maximizing near-term cash-flow potential" — that is, renewing the money-parched former Receptagen through the sale of products in the burgeoning Southeast Asian market.
Singapore's five-year "pioneer" tax-free status granted by the government to certain industries, product by product, will help. When the period runs out, the company can apply for another five tax-free years.
Until the merger is complete, Baba declined to elaborate on the company's long-term plan for resuming vigorous research and development, but noted products tend to reach the marketplace much faster in Southeast Asia than in the U.S.
"We can conduct clinical trials much faster and at very low cost," he said. Data from those trials can then be presented as part of the long, arduous FDA approval process.
Receptagen, founded in 1992, develops non-immunosuppressive therapies for patients with life-threatening diseases. Receptagen Corp., a wholly owned subsidiary, is developing proprietary "growth blocker" drugs, which break up and destroy cancer cells. Ryan Pharmaceuticals, another wholly owned subsidiary, is working toward a pro-drug formulation of Coenzyme Q10, for the treatment of stroke. Receptagen plans to enter Phase I trials for that product in the next few years, and owns the exclusive right to market it for use in treating AIDS symptoms.
The company had struggled recently. With only a handful of employees earlier this year, it underwent debt restructuring under the Bankruptcy and Insolvency Act in British Columbian court. Receptagen sold a revenue-draining acquisition made in 1994, Vancouver Wholesale Drugs, and was restructuring with help from InterUnion.
In the Scitech deal, Baba finds cause for optimism. "We've taken a company that was in quite dire condition and restructured, refinanced and now merged it," he said. "We're very happy. It beats the alternatives." *