Beset with product problems, unhappy shareholders and plummetingstock prices over the last several years, San Diego-based Gensia Inc.has spun off its biotech operation and moved into the oncology andpharmaceutical markets.
Gensia will issue 29.5 million new shares of Gensia common stock toacquire three pharmaceutical companies: Sicor S.p.A, of Milan,Italy, and Sintesis Lerma S.A. de C.V. and Lemery S.A. de C.V.,both of Mexico.
Martha Hough, vice president of finance and corporatecommunications at Gensia, told BioWorld Today that one reason forthe acquisitions was to delineate Gensia's image on Wall Street.
"Wall Street thinks we are hard to understand," Hough said. "We area device business, a biotech business, a specialty multisourcepharmaceuticals business and an injectable multisource drugbusiness. We saw an opportunity to build specialty pharmaceuticalsto a size that was international in reach and to a greater level ofvisibility."
Based on the closing price of Gensia stock on Tuesday, theacquisitions have a total price tag of approximately $158.6 million.However, the value of the deals will be based on the stock prices atthe time of the transactions, which, Hough said, is slated for nextMarch.
The research and development programs at Gensia will bereorganized as a new public company entitled MetabasisTherapeutics, which, Gensia said, will obtain support from outsideresearch collaborations and financings.
Metabasis Therapeutics will be involved in four various researchprograms: a collaboration with Pfizer Inc. on the treatment of drugsfor pain, a diabetes program, a cardiovascular disease program, anddevelopment of a product, GP531, designed to treat acutecardiovascular disease.
Sicor and Lerma will supply bulk pharmaceuticals, ontologicalcompounds, corticosteroids and cyclosporine to various marketsaround the world. Lemery and Gensia subsidiary, GensiaLaboratories Ltd., will handle the formulation, filling, packaging andmarketing of multisource injectable drugs. Entitled Gensia Sicor, thenewly-aligned company will continue to be headquartered in SanDiego.
Gensia also is planning to transfer all of its medical device assetsincluding the Laryngeal Mask Airway, The GenESA System and theFeedback Controlled Heparin System into a wholly-owned subsidiaryto be called Gensia Automedics Inc.
Results from a failed Phase III international trial of the compoundProtara brought Gensia stock prices tumbling from $62 a share inFebruary 1992 to $5 a share by October 1994, when the companyfinally stopped work on the drug. Protara was being developed toprevent heart attacks during bypass surgery.
Since that time, the stock has recovered none of its value.
In 1994, Gensia settled class action shareholders' lawsuits spurred bythe failure of Protara. Under terms of the settlement, the plaintiffssplit $4 million worth of Gensia common stock and $13 million incash.
Based on the 51 percent drop in stock price and a net loss of $50million for the year, Gensia restructured its operations in 1995 toconserve cash. Thirty-five positions were eliminated at the time.
Evan Sturza, editor of Sturza's Medical Investment Letter, of NewYork, saw the acquisition as a smart move that would allow thecompany to focus on the generic injectable drug aspect of thebusiness.
"Gensia Laboratories has provided the company with the bulk of itsrevenue," said Sturza. "The company burn rate was taking away fromit and by this acquisition, the company has separated its prize assetaway from its less desirable ones."
Jim Flynn, analyst with Furman Selz, in New York, agreed that theacquisition was a good move. "In 1997, they were going to do $100million, now they will do more like $175 million," projected Flynn,who predicted the stock value would rise "to somewhere in the $9range."
Sicor, Lerma and Lemery recorded sales of $60 million in 1995 and$36.4 million for the six months ending June 30. Gensia has sales of$53.5 million and $25.7 million for comparable periods.
Gensia reported a net loss of $39.2 million or $1.08 a share for thenine months ending Sept. 30, compared to a net loss of $36.2 millionor $1.10 a share for the same period last year.
As of Sept. 30, Gensia had working capital of $35.5 million and cashand short-term investments of $27 million, compared to workingcapital of $67.7 million and $58.9 million in cash and short-terminvestments as of December of 1995.
Gensia's stock (NASDAQ: GNSA) closed Wednesday down $0.375to $5. n
-- Frances Bishopp
(c) 1997 American Health Consultants. All rights reserved.