Systemix Inc.'s majority owner, Swiss drug maker Sandoz Ltd., hasbeen thwarted in its $66 million takeover bid by the Californiacompany's three independent board members who rejected the $17-per-share buyout as too low for minority shareholders.
Sandoz, of Basel, Switzerland, which owns about 73 percent ofSystemix, made the unsolicited offer for the other 27 percent, or 3.9million shares, in May 1996.
In 1991 when Sandoz first purchased a 60 percent interest inSystemix for $392 million, the sale agreement included a provisionthat any buyout would have to be approved by at least two of threeindependent directors sitting on the 11-member board. Sandoz holdssix seats and Systemix representatives occupy the other two.
Sandoz increased its Systemix ownership to the current level in 1995with an equity investment of $80 million for 4.6 million shares at$17.33 per share. The deal also included warrants to buy another 1.4million shares at $27.50 per share in three years.
When Sandoz purchased its initial majority position in 1991 it paid$65 per share for 6 million Systemix shares.
Sandoz's $17 per share buyout offer in May represented a 55 percentpremium to the stock's trading price of $11, which was a 52-weeklow. (See BioWorld Today, May 28, 1996, p. 1.)
Systemix's stock (NASDAQ:STMX) closed Tuesday down $1.75 to$14.25.
Wendy Hitchcock, chief financial officer of Palo Alto, Calif.-basedSystemix, said she could not comment on the independent directors'decision.
The three directors are the chairman, Joseph Ruvane, a formerpresident and CEO of Glaxo Inc., of Research Triangle Park, N.C.;Harold Edgar of Columbia University Law School in New York; andEdgar Schollmaier, CEO of Alcon Laboratories Inc., of Forth Worth,Texas.
Ruvane and Schollmaier could not be reached for comment. Edgardeclined to answer questions.
Systemix, in a prepared statement, said the trio's "decision was basedin part on the advice of Lehman Brothers, of New York, that the offeris inadequate and not fair to minority shareholders from a financialpoint of view."
The directors added they were "willing to discuss an acquisition bySandoz at an appropriate price." They also said Sandoz declined toexamine Lehman Brothers' financial analysis and rejected a requestby the directors to study the pharmaceutical company's calculation ofSystemix's value.
Sandoz officials at the company's U.S. headquarters in New Yorkdeclined to comment on the standoff. They issued a preparedstatement saying Sandoz "was disappointed by the decision butwould study it before taking further action."
The independent directors were not alone in their rejection of theSandoz offer. Systemix noted in the fiscal report it filed with theSecurities and Exchange Commission for the quarter ending June 30,1996, that six minority shareholder lawsuits had been filed opposingthe takeover.
A major attraction for Sandoz in allying with Systemix is its leadtechnology program and patent protection on isolation and use of asubstantially pure subset of hematopoietic stem cells (HSC), calledCD34(+)Thy(+)Lin(-). The cells are responsible for renewing allblood and immune system cells and could have broad applications.
In November 1995, data from a Phase I/II trial using autologousCD34ThyLin stem cell transplants to reconstitute chemotherapy-destroyed bone marrow of multiple myeloma patients demonstratedthe transplants can engraft in patients. However that clinical studysubsequently was stopped at the Arkansas Cancer Research Center inLittle Rock because of concerns about the way the stem cells werebeing handled.
Hitchcock said a trial similar to the study in Arkansas is ongoing inFrance and findings will be presented in December.
In another U.S. clinical trial, allogeneic transplants of CD34ThyLinstem cells are being used in utero to correct genetic diseases inunborn children.
Systemix also expects to file an investigational new drug applicationwith the FDA by the end of this year to begin a gene therapy trial fortreatment of HIV in collaboration with Sandoz. The therapy willinvolve transducing CD34ThyLin stem cells with a gene that resiststhe virus in an attempt to protect T cells from infection.
Sandoz is merging with fellow Basel drug maker, Ciba-Geigy Ltd., toform a new company called Novartis. The merger is expected to becomplete later this year following approval from the U.S. FederalTrade Commission. n
-- Charles Craig
(c) 1997 American Health Consultants. All rights reserved.