CellPro Inc. officials on Monday described Corange InternationalLtd.'s attempt to negate a $60 million equity investment as "legal andtechnical maneuvering," and said they will wait until the end of themonth to see if their stem-cell partner is in breach of the contract.
The threat from Corange, however, was enough to scare investors.CellPro's stock (NASDAQ:CPRO) fell 11 percent, dropping $1.25 to$10 in trading of 531,000 shares.
Corange, based in Bermuda with offices in London, told Seattle-based CellPro their December 1993 agreement is invalid because itviolates certain European antitrust laws. Corange made a $50 millionequity investment in January 1994, at $43.09 per share, and is due tomake a $60 million investment this month, paying $47.40 per share.
A separate agreement was signed covering diagnostics as well as oneestablishing a joint venture in the area of stem cell therapeutics.CellPro released Corange's intent after the market closed Friday.(See BioWorld Today, April 3, 1995, p. 1.)
Richard Murdock, CellPro's president and CEO, told analysts andreporters in a conference call Monday that he doesn't believe anyantitrust laws are being violated, and that CellPro intends to takewhatever steps it can to enforce the contract.
"The equity agreement is very clear-cut," Murdock said. "Therearen't really any provisions to allow one to opt out. We will continueto perform under all the terms of the agreement as we go forward."
Murdock said CellPro is putting a response together, and the nextmajor event will be at the end of the month when Corange either hasor hasn't made the payment.
A Corange spokeswoman in London referred reporters to itssubsidiary, Boehringer Mannheim GmbH, of Germany. BoehringerMannheim officials did not return calls from BioWorld.
Peter Ginsberg, a biotechnology analyst with Vector SecuritiesInternational Inc., of Deerfield, Ill., retained a neutralrecommendation on CellPro.
"My sense is that CellPro is going to receive something out of this,"Ginsberg told BioWorld. "Will they get $60 million at $47.40? Ithink they'll get something less than that.
"I think that CellPro would be comfortable with a reasonablefinancial settlement as long as it entailed the return of the rights of itsproducts. Then CellPro would have the opportunity to go and findnew partners."
Ginsberg said he thought the stock might drop further. But he pointedto CellPro's strong financial position of $65 million in cash _enough for about two years _ and its position as what Ginsbergconsiders to be the leader in stem cell therapy.
The contract between the companies calls for arbitration as the firststep to dispute resolution. That offers the companies a quicker andcheaper alternative to legal action.
Murdock said the deal initially was designed to be a workingpartnership, with Corange's management team anxious to be a majorplayer in cell therapy. But restructuring at Corange included thedeparture of two key CellPro supporters _ CEO Max Link and MarkMcDade, chief operating officer of Boehringer Mannheim-Therapeutics. Murdock said he wouldn't characterize the relationshipnow as hostile, but he wouldn't call it particularly friendly, either.
CellPro's lead technology is its Ceprate SC stem cell concentrationsystem, which is designed to capture and purify rare cell populations.The system targets CD34+ cells, which replicate to form cells of theblood and immune system. It is on the market in Canada in someparts of Europe, but the FDA said in January a U.S. application mustbe amended before approval is considered.
CellPro could make another $110 million from the deal with Corangein milestone payments and research and development support. "So farwe haven't seen any of that," Murdock said.
Murdock said CellPro has not been in negotiations with otherpotential partners because "we had no indication that the agreementwas going to be breached. I think it's very likely we would find agood partner in Europe if we decide to do that." n
-- Jim Shrine
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