CytRx Corp. intends to merge its wholly-owned subsidiary, VaxcelInc., with Zynaxis Inc. to create a new public company specializing invaccine delivery enhancement. The new company will be based inAtlanta.

The merger is contingent upon Zynaxis, of Malvern, Pa., shareholderapproval, but the deal is expected to close by the end of the firstquarter 1997. CytRx will provide $2 million in financing during theinterim. The new Vaxcel will be traded on the NASDAQ SmallCapmarket.

"This is an ideal merger," said James Yahres, vice president ofinvestor relations at CytRx. "It allows us to take Vaxcel publicwithout the risks of an initial public offering. And, it gives Vaxcelnew and complimentary technologies that are already licensed."

When the merger is completed, CytRx, of Atlanta, will hold 87percent of the new company's stock, which Yahres said reflects thevalue of Vaxcel.

Vaxcel has specialized in enhancing the effectiveness of injectablevaccines and currently has Optivax _ an injectable adjuvant _ withvaccines aimed at metastatic cancers in Phase I clinical trials. Zynaxishas licensed its PLG microspheres _ a technique for augmenting oralvaccines _ to allergy desensitization specialist ALK in Copenhagen,which has the technology in Phase II clinical trials.

"This merger strengthens our portfolio without costing us anything,"said Paul Wilson, current Vaxcel president and CEO, who will headthe merged company. "And we are acquiring a strong licensingpartner right out of the gate."

Wilson said that Vaxcel will concentrate on licensing its technologieson a vaccine-by-vaccine basis. He sees pediatric vaccines as apotential licensing target for Zynaxis' oral adjuvants. "Currently,infants receive three hepatitis injections, four hemophilus influenzainjections and five DTP injections as standard vaccinations," saidWilson. "If those could be turned into oral vaccines, both moms andkids will be happy." n

-- Lisa Seachrist Washington Editor

(c) 1997 American Health Consultants. All rights reserved.