By Charles Craig
Genzyme Corp. is making an aggressive push into gene-based cancer research by forming a new division with the acquisition of PharmaGenics Inc., which has been working with the p53 tumor suppressor gene and has developed a technology for comparing gene expression patterns in normal and diseased tissues.
Genzyme officials said owners of the privately held PharmaGenics agreed to the takeover in return for 4 million shares in the new Genzyme Molecular Oncology Division, which will have its own tracking stock.
The PharmaGenics shareholders will own 40 percent of the division while Genzyme stockholders, who will receive 6 million shares, will own 60 percent. An initial public offering for Genzyme Molecular Oncology will be held following the close of the PharmaGenics acquisition in May.
Gail Maderis, vice president of gene therapy for Cambridge, Mass.-based Genzyme, will become president of Genzyme Molecular Oncology. She said the value of the acquisition will be established by the IPO price.
She said PharmaGenics in early 1996 held a round of financing in which it raised $27 million. But, she noted, that was before the company had demonstrated the value of its serial analysis of gene expression (SAGE) technology, which is a key attraction in the Genzyme takeover.
Edmund Debler, analyst with Mehta & Isaly in New York, estimated PharmaGenics' worth at between $50 million and $75 million.
Officials of PharmaGenics in Allendale, N.J., could not be reached for comment.
Debler said the creation of the Molecular Oncology division gives Genzyme a much-needed "spark" for its drug discovery programs.
"Genzyme clearly needed to expand its research and development efforts," Debler said. "They did a good job in bringing many technologies under one roof in the [Genzyme] Tissue Repair division. It looks like they're doing the same here."
The Genzyme Molecular Oncology tracking stock will be one of three under the umbrella of Genzyme Corp. The other two are Genzyme General Division (NASDAQ:GENZ) and the Tissue Repair Division (NASDAQ:GENZL).
Genzyme General Division ended Monday down $0.875 to $27.125. The Tissue Repair Division was unchanged at $10.50.
David Stone, analyst with Cowen & Co. in Boston, said creating a division with its own tracking stock allows Genzyme to increase its research and development investment and expand its pipeline without decreasing the general division stock, which is traded based on earnings.
Stone observed the PharmaGenics acquisition moves Genzyme into the genomics field, an area that has generated considerable excitement among biotechnology investors.
Maderis said PharmaGenics' SAGE technology will generate near-term revenues for the Molecular Oncology division and support the longer-term gene-based drug development initiatives, such as gene therapy.
The SAGE technology enables researchers to comprehensively analyze gene expression patterns in normal and cancerous tissues. (See BioWorld Today, Oct. 25, 1995, p.1.)
Maderis said her Molecular Oncology division will contract with genomics and pharmaceutical companies for a SAGE analysis of their diseased tissue samples and the division will sublicense the technology.
She added Genzyme itself has established a data base of 1 million gene sequences from cancerous tissues and will sell access to that information.
In addition to the SAGE technology, PharmaGenics, which has 36 employees, has established drug development collaborations targeting the p53 tumor suppressor gene, which is believed to play a role in a wide variety of cancers.
Genzyme brings the most advanced program to the Molecular Oncology Division. A gene therapy targeting metastatic melanoma is in Phase I trials in collaboration with the National Cancer Institute.
Maderis said her division will be able to draw on all Genzyme resources and initially will have the equivalent of 75 full-time staffers working on division business. *