By Frances Bishopp

After acquiring Houston Biotechnology Inc. five months ago, Medarex Inc. purchased its second company, GenPharm International Inc., in a $65 million deal designed to expand Medarex's technology base to include GenPharm's patented HuMab-Mouse strain, which contains functional human antibody genes.

The $8.6 million acquisition of Houston Biotechnology, of The Woodlands, Texas, brought Medarex, which develops treatments for cancer and AIDS, a late-stage product. The drug, an immunoconjugate, is MDX-RA for prevention of secondary cataracts in patients who undergo cataract surgery.

MDX-RA is currently in Phase II clinical trials. In addition to MDX-RA, Medarex obtained another corporate partner, Santen Pharmaceutical Co. Ltd., an Osaka, Japan-based provider of ophthalmic products.

The acquisition of GenPharm brings to Medarex, of Annandale, N.J., a broad discovery platform, Donald Drakeman, president and CEO of Medarex, told BioWorld Today.

"These [purchases] really made bookend acquisitions for us," Drakeman said. "They made great sense for us and if we see others that make great sense, we will absolutely do them."

Drakeman said Medarex expects to receive $33 million in cash by the end of 1998 through a combination of GenPharm's cash and certain patent license fees and related payments from third parties.

The transaction is expected to close in the third quarter of 1997. Medarex will issue up to 3.5 million shares in 1997 to GenPharm's stockholders following approval of the transaction by GenPharm and completion of certain legal and regulatory requirements.

Additional shares will be issued by the end of 1998 for the balance of the purchase price, but only to the extent that GenPharm has received the patent license fees and related payments.

Medarex's stock (NASDAQ: MEDX) closed Tuesday at $7.75, down $0.75.

Drakeman said the shares issued in 1997 will be subject to "lock-up" restrictions on transfer.

Barbara Hoffman, an analyst with Vector Securities International Inc., of Deerfield, Ill., viewed the takeover as very positive for Medarex. "With the acquisition of GenPharm's transgenic mouse technologies, Medarex has drug discovery and development capabilities from concept through the clinic," she said. "These capabilities can be exploited across multiple targets and partners in a business model that is economically attractive."

Through the acquisition, Medarex obtains three new corporate partnerships with Eisai Co. Ltd., of Tokyo; Centocor Inc., of Malvern, Pa.; and LeukoSite Inc., of Cambridge, Mass.

GenPharm's technology, Drakeman explained, will complement Medarex's bispecific antibody technology.

Medarex's bispecific antibody binds to macrophages and to the targeted breast cancer cells, linking the two and triggering destruction of the specific target without the introduction of any toxic or radioactive substances.

With its killing function triggered by the bispecific antibody, the macrophage engulfs and destroys the diseased cell.

Medarex, Drakeman said, has a very strong product development program for the monoclonal and bispecific antibodies, six of which are in clinical trials. "We have taken their [GenPharm's] strong research and added it to our very strong development," Drakeman said, "to create a company with a much broader platform."

GenPharm's HuMab-Mouse may be used to generate human monoclonal antibodies with strong binding abilities to a wide variety of disease targets. Medarex, Drakeman said, intends to develop fully human targeting antibodies that can be linked to its patented bispecific/trigger technology.

"We will take their human antibodies, and their ability to make new human antibodies, and plug them in our product development program," Drakeman said. "With the GenPharm technology we can create new targets so we can make more bispecific or monoclonal antibody products for treating cancer, infectious disease or autoimmune disease."

In addition, Drakeman said, Medarex can create new human antibodies for partners. "We can not only create the human antibodies in the GenPharm mice, we can also scale them up, test them, and begin clinical trials in our own product development facilities," Drakeman said. "We can offer a soup-to-nuts partnering opportunity for people who are interested in new therapeutic products, and we can do it very rapidly," Drakeman said.

Before the acquisition of GenPharm, Medarex had four collaborations: Novartis AG, of Basel, Switzerland, for breast, colon, prostate and other Her-2+ cancers; Merck KGaA, of Darmstadt, Germany, for renal, head and neck, breast and other epidermal growth factor-receptor (EGF-R+) cancers; Centeon LLC, of King of Prussia, Pa., for hematological autoimmune diseases; and Santen.

Medarex's lead product. MDX-210, is currently in phase II trials. MDX-210 targets breast, ovarian and prostate cancers whose tumor cells express the HER-2 antigen.

Medarex's cash, as of Dec. 31, 1996, totaled approximately $32 million. *