A $60 million equity investment Corange Ltd. is due to make inCellPro Inc. this month is in jeopardy because of Corange claims thatthe original pact is unenforceable and violates European antitrustlaws. CellPro disagrees with the claim, and intends to defend itsposition.

The news was released from Seattle-based CellPro late Friday.Corange notified CellPro by letter of its opinion last week, andCellPro responded in turn with a letter saying it intended to seekwhatever remedies are available under law. Corange officials couldnot be reached for comment.

"This has all arrived in the last 48 hours," Lee Parker, CellPro'sdirector of investor relations, told BioWorld. "This is the first timethey've ever specifically put into print that they had a problem withthe contract and didn't want to perform."

Privately held Corange, based in Bermuda, is the parent company ofBoehringer Mannheim GmbH and DuPuy Orthopedics.

The relationship between the companies started in December 1993with an agreement worth up to $220 million to CellPro, whichfocuses on stem-cell technology. An equity part of the deal called forCorange to invest $50 million, at $43.09 per share, which it did inJanuary 1994. A second equity investment of $60 million was to bemade 15 months after the first, at a price between $47.40 and $60 pershare.

A separate licensing agreement covering diagnostics and oneestablishing a joint venture in stem-cell therapeutics also was signed.CellPro got a $10 million signing fee, and could have made up to$100 million in research support and milestone payments.

The agreement calls for arbitration as a first step in disputeresolution.

"I haven't a clue as to what they mean," Parker said of the antitrustand unenforceable claims that Corange cited in its letter to CellPro."This is the first step in their trying to get out of the contract. It seemsthey would like to pay less for the stock, and maybe change therelationship on the diagnostics and therapeutics."

Parker said his comments were only opinions, since Corange hasn'tmade its position clear to CellPro. Corange completed the second ofits two-part $75 million equity investment in Protein Design LabsInc. (PDL) in December, but at the same time terms of the deal werechanged so that PDL's potential milestone payments were reduced by$68 million. That deal was signed shortly before the one withCellPro.

Parker said Max Link was Corange's CEO when the original dealwas signed. Shakeups at Corange last year resulted in a number ofmoves, including the departure of Link and others that he brought in.

"The new management clearly has a different vision of how they wantBoehringer Mannheim to go," Parker said. "They've beenrestructuring their company for the last year or so. It's pretty clearthey don't feel it's in their best interest any longer to pursue the typeof therapeutics and diagnostics we're involved in."

CellPro's stock (NASDAQ:CPRO) closed at $32.25 when theCorange collaboration was announced in 1993. It closed Friday at$11.25. Corange's per-share investment was to be at a 55 percentpremium to CellPro's stock over the interceding 15 months, but noless than $47.40 nor more than $60 per share.

"We feel the contract is good regardless of what the price of the stockhas done," Parker said. "Ever since Max Link left Corange, WallStreet has been in swivet about what's going to happen with ourcontract."n

-- Jim Shrine

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