After more than a decade of battling in the rough and tumble world ofdrug making, Houston Biotechnology Inc. Monday said it has agreedto a buyout by Medarex Inc., of Annandale, N.J., as the best strategyfor moving its product candidates to market.
J. Russell Denson, Houston Biotechnology's president and CEO, saidfor "a small public, independent company" such as his, struggling tocommercialize its technology is like "being in a big fight with a smallstick . . . Bigger is preferable in the drug development business."
Denson said Houston Biotechnology, with dwindling cash resources,was in the position of having to conduct a financing to boost its ownsize or join a company that already had expanded its drugdevelopment capabilities.
The proposed takeover by Medarex, which like HoustonBiotechnology has expertise in monoclonal antibodies, is a "good andfair transaction for our shareholders, partners and employees,"Denson observed.
Medarex, of Annandale, N.J., signed a letter of intent to acquire all5.64 million outstanding shares of Houston Biotechnology, of TheWoodlands, Texas, in a stock swap valued at about $8.6 million.
For each Houston Biotechnology share, its stockholders will receive0.182 Medarex shares. Based on the $8.375 closing price Friday ofMedarex's stock (NASDAQ:MEDX), the company is paying about$1.52 per share for Houston Biotechnology (AMEX:HBI) _ a 63percent premium to its $0.937 price at the end of trading Friday.
The takeover is expected to be complete in the first quarter of 1997.Operational details of the merger were not disclosed. HoustonBiotechnology has 10 employees.
Medarex closed Monday down $0.50 to $7.875. HoustonBiotechnology gained $0.313 to end the day at $1.25.
Michael Applebaum, Medarex's chief financial officer, said hiscompany is acquiring Houston Biotechnology's technology, whichincludes a monoclonal antibody in Phase II trials for cataracts andcorporate support for the program from Osaka-based SantenPharmaceuticals Co. Ltd.
As of Sept. 30, 1996, Houston Biotechnology had $164,000 in cashand reported a net loss of $633,000 for the first nine months of theyear.
Medarex, which is developing bispecific antibodies, has five drugs inclinical trials for cancer, leukemia and AIDS. A bispecific antibodydrug consists of two monoclonal antibody fragments and binds toboth diseased cells and immune system killer cells, making sure thelatter attack the former.
Medarex has collaborations with Ciba-Geigy Ltd., of Basel,Switzerland, for bispecific antibodies targeting breast, ovarian andprostate cancers and with Merck KGaA, of Darmstadt, Germany, forneck, breast, brain and lung cancers. The partnerships are based ontwo different genetic targets expressed in cancer cells.
Applebaum said Medarex has the manufacturing, production andclinical trial expertise to develop Houston Biotechnology's products.
Medarex also has a strong cash position. As of Sept. 30, it had $34.7million in cash and reported a net loss of $2 million for the first ninemonths of the year.
Houston Biotechnology's most advanced product is an immunotoxin,4197X-RA, for prevention of secondary cataracts in patients whoundergo cataract surgery. In January 1996, Santen extended itscollaboration on the immunotoxin, agreeing to pay $7.75 million oversix years.
The immunotoxin is a toxic agent linked to a monoclonal antibody. Inthe case of 4197X-RA, the monoclonal antibody binds specifically tohuman lens epithelial cells and delivers the cytotoxin, ricin A. Thetreatment is administered following cataract surgery to prevent thegrowth of lens epithelial cells, which cause recurrence of cloudyvision.
Houston Biotechnology also has other opthalmic drug candidates inpreclinical trials. n
-- Charles Craig
(c) 1997 American Health Consultants. All rights reserved.