By Charles Craig
Progenitor Inc., in preparation for reviving the initial public offering (IPO) it postponed last fall, is adding some punch to its genomics programs with a proposed acquisition of a disease gene discovery company, Mercator Genetics Inc., in a deal valued at about $30 million.
The merger agreement gives Progenitor, of Columbus, Ohio, a takeover option that will be exercised simultaneously with completion of the IPO. Shareholders in Mercator will receive $22 million worth of Progenitor common stock; the number of shares will be determined by the IPO per share price.
Progenitor also has agreed to assume about $8 million in Mercator liabilities, making the buy-out a $30 million acquisition.
To support Mercator's gene discovery efforts prior to the IPO, the Menlo Park, Calif., company will receive a $6.6 million line of credit from Progenitor's majority shareholder, Interneuron Pharmaceuticals Inc., of Lexington, N.C. Following the public offering, Progenitor will assume responsibility for Interneuron's loan.
Progenitor's option to acquire Mercator expires July 31, 1997. If the IPO is not completed, Progenitor is under no obligation to purchase Mercator.
Elliott Sigal, Mercator's president and CEO, said the takeover price represents "some premium" for his company's shareholders.
The merger, Sigal added, brings together two important technologies for gene-based drug development * Progenitor's functional genomics capabilities and Mercator's human disease gene discovery techniques.
In August 1996, Mercator reported discovery of a gene associated with hereditary hemochromatosis, a disease characterized by iron overload in the body. The company also has gene-discovery programs in asthma, schizophrenia and cancer.
Progenitor practices gene therapy and functional genomics with a focus on developmental biology, which involves discovery and analysis of genes involved in embryonic-stage formation of a person.
When Progenitor registered with the Securities and Exchange Commission for an IPO in June 1996, the four-year-old company proposed selling 2.5 million shares in a projected price range of $11 to $13 per share. The offering was postponed in September 1996 during a slump in market conditions for biotechnology companies. (See BioWorld Today, Sept. 3, 1996, p. 1.)
Progenitor's IPO registration will be amended before the offering becomes active.
Last month, Progenitor signed a potential $42 million agreement for the leptin receptor it discovered while studying genes involved in the development of hematopoietic stem cells. The deal gave Amgen Inc., of Thousand Oaks, Calif., rights to the leptin receptor for its anti-obesity drug candidate, leptin, which is a hormone believed to be involved in regulating fat content. (See BioWorld Today, Jan. 7, 1997, p. 1.)
Progenitor has two other partnerships worth a combined $100 million. It is collaborating with Chiron Corp., of Emeryville, Calif., for gene therapies targeting cancer, cardiovascular disorders and infectious diseases. It also is working with ZymoGenetics Inc., of Seattle, for development of two blood cell growth factors involved in restoring bone marrow depleted by cancer chemotherapy and radiation treatments.
ZymoGenetics is a subsidiary of Novo Nordisk A/S, of Bagsvaerd, Denmark.
Progenitor's president and CEO, Douglass Given, said the addition of Mercator's human disease genetics expertise gives his company a "short-cut" to building a broad-based genomics company.
"There's very little science, research and technological redundancy" between the two companies, Given said, "and it is our intention" to keep Mercator's staff intact. Mercator has 39 employees.
In addition, Mercator's co-founder, David Cox, a professor of genetics and co-director of the Stanford University Human Genome Center, will remain a scientific advisor to the merged companies.
Given will retain his posts as president and CEO. Sigal will join Progenitor in the newly created position of senior vice president of research and development.
Interneuron, which has three other subsidiaries, will own 40 to 45 percent of Progenitor following the IPO. Interneuron's stock (NASDAQ:IPIC) closed Tuesday at $30, up $0.375. *