Cangene Inc., which recently divested itself of its leadtechnology, is selling most of the rest of the company in a"reverse acquisition" of Rh Pharmaceuticals Inc., asubsidiary of privately held Apotex BiotechnologyHoldings Inc.

Cangene, of Toronto, will distribute to shareholders thecash from the sale of its nucleic acid amplificationtechnology before gaining a 17 percent interest in the newcompany. Apotex, a large Canadian pharmaceuticalcompany focusing on generics, will invest $30 million inthe new company over five years for the development ofgeneric biotechnology products.

Cangene recently sold its NASBA diagnostic technologyto Organon Teknika Corp. for $22 million (U.S. $16.2million). It has about $25 million in cash, analystsestimated, and granulocyte macrophage colonystimulating factor and interleukin-3 products in humantrials.

"The Canadian investment community would not furtherfinance Cangene," Wayne Schnarr, a biotechnologyanalyst with Toronto-based Yorkton Securities Inc., toldBioWorld Today. "The company had to be broken up inorder to get the best possible return."

Schnarr _ and Christine Charette, a senior analyst,biotechnology, for Toronto-based Nesbitt Burns Inc. _each said shareholders will get about $2.55 cash from thedeal. Cangene's stock, traded only in Canada, closed up35 cents Monday at about $2.95, meaning shares in thenew company are being valued at 40 cents apiece. Thenew company will have about 50 million sharesoutstanding, putting its market capitalization at about $20million.

Rh Pharmaceuticals, of Winnipeg, Manitoba, inventedWinRho S/D, a hyperimmune polyclonal antibody that isapproved in the U.S. for treatment of certain blooddisorders, and licensed the rights to Rockville, Md.-basedUnivax Biologics Inc.

Charette said the only real worth at Cangene now is thecash. But, she added, the $2.95 closing price ofCangene's stock Monday is severely undervaluing thenew company, given Rh's near-equal royalty arrangementwith Univax, and the latter's market capitalization ofabout U.S. $120 million.

Schnarr, while saying the market capitalization of thenew company could exceed $100 million, termed thestock a speculative buy at price up to $3.50. Too little isknown now about the private company's genericsportfolio, he said.

"I think it's an excellent deal for Cangene shareholders,"Charette said. "It was not worth spending another $25million [to continue trials of Cangene's products]. I givemanagement so much credit. They basically wrotethemselves out of a job. They took the step mostcompanies will never take."

Apotex Biotechnology Holdings is a subsidiary ofSherfam Inc., which is the parent company of theToronto-based Apotex Group. Apotex Inc. distributesmore than 200 generic drugs in more than 60 countries.

An Apotex official told BioWorld Today the acquisitionis being made primarily for two reasons: gaining access tothe financial markets via the public company, and gainingaccess to the technology.

"We have to develop expertise in those types of products[biotechnology] if we're going to remain a genericscompany into the 21st century," he said, adding thatCangene's bacterial expression systems and its personnelmay prove helpful in the biotechnology field. "Had themove been made for tax reasons, as some suggested,Apotex would have gained more by purchasing all ofCangene," he said.

Cangene recently reduced staff from about 90 to 70people. With the sale of its NASBA technology toOrganon, it retained non-exclusive rights to the fooddiagnostics. Cangene said creation of a NASBA-relatedspin-off will be considered. n

-- Jim Shrine

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