Scherer Healthcare Inc.'s bid to take over ProCyte Corp. appears tobe in serious jeopardy following the resignations of two top Schererexecutives, and the dramatic drop in the company's stock price.

Scherer, of Atlanta, and Derma Sciences Inc., of Old Forge, Pa.,proposed a three-way merger with ProCyte on Dec. 8. ProCyte, ofKirkland, Wash., rejected the bid, and has resisted what has becomemore of a hostile takeover attempt than a friendly merger proposal.

Andre Garnet, an analyst with A.G. Edwards & Sons Inc., of St.Louis, told BioWorld recent events "probably mean the takeover isover. Apart from what is happening inside Scherer, the price of theScherer shares is so low that what they're offering for ProCyte isbelow book value. Looking at it from the point of view of ProCyteshareholders, it has become even more doubtful than before."

Garnet said ProCyte is moving forward with its copper-based Iaminproduct, which failed in an earlier trial to show significance versusplacebo against diabetic plantar ulcers. ProCyte reported $43 millionin cash and equivalents as of Dec. 31.

"Shareholders would have to ask themselves whether they wouldrather stay with ProCyte," Garnet said, "as opposed to going withScherer, which has no particular expertise in biotechnology, and hasnot been particularly successful in its own business."

Scherer and Derma had extended the original Feb. 17 deadline to theclose of business today for their invitation to ProCyte shareholders torequest a special meeting to consider the takeover. Scherer's lowstock price and internal troubles may make it difficult to get thoseholding 10 percent of ProCyte stock to call for the meeting, Garnetsaid.

On Friday, Scherer's chairman and CEO Robert Tucker and vicechairman James Brands resigned. The two men have been prominentin pushing the merger. Scherer corporate secretary Amy Murphy toldBioWorld Monday their resignations were related to "compensationissues."

"It was a salary issue," she said. "I really don't think it had much todo with that [ProCyte] at all."

Robert Scherer Jr., who owns about 51 percent of Scherer's stock,took over as chairman and CEO. He did not return calls Mondayfrom BioWorld. John Borthwick, Derma Sciences' CEO, said hecould not comment about the resignations' impact on the proposedmerger, or their effect on Derma's relationship with Scherer.

The original proposal called for Scherer to exchange one new shareof its common stock for every 3.4 ProCyte shares, and one share forevery 4.1 Derma Sciences shares.

At the time, Scherer was trading at about $20, ProCyte at about $3and Derma Sciences at $5. Scherer (NASDAQ:SCHR), hit hard ontwo trading days earlier this month, lost another $1.50 Monday,closing at $6. ProCyte was unchanged at $2.69, and Derma Scienceswas up 6 cents per share, closing at $5.06. n

-- Jim Shrine

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