Scherer Healthcare Inc. continues to aggressively pursue a mergerwith ProCyte Corp. despite the clear rejection of the proposal byProCyte's board of directors.

Scherer, of Atlanta, and Derma Sciences Inc. proposed a three-waymerger on Dec. 8 that would be accomplished through issuance ofnew Scherer stock. Cash-rich but revenue-poor ProCyte has made itclear that its not interested in joining forces with those suitors.ProCyte formally declined the proposal in a harsh letter dated Dec.27.

On Friday, Scherer said it filed preliminary proxy material with theSecurities and Exchange Commission. The intent is to call a specialmeeting of shareholders who then would vote current directors out,elect new directors and finally sell the company, presumably toScherer.

Scherer and Derma said they own 640,500 shares of ProCyte, or astake of about 4.9 percent. Robert Tucker, Scherer's chairman andCEO, told BioWorld the special meeting may be called as soon asearly March.

"We, as shareholders, think its absolute folly to continue in thedirection the board is currently taking," Tucker said. "They've spenthalf the company's money and it looks like they're going to spendthe other half without any positive results. They seem hell-bent ongoing on and spending the remaining amount. To us they seem to bechasing science that's not impressive."

ProCyte, a Kirkland, Wash., company developing products based oncopper, had a setback in October when its lead product, Iamin gel,failed to show statistical significance in a trial for diabetic plantarulcers. But the company's licensee in Japan plans to take Iamin intothe clinic there, ProCyte officials previously said, and the companyalso plans to take candidates into the clinic in 1995 for HIV,inflammatory bowel disease and hair loss.

The ProCyte official authorized to talk to BioWorld could not bereached Friday.

Regardless of the merits of the company's science, some of itsattractiveness certainly is in its cash position, which it said wasaround $40 million at the end of 1994.

Despite Tucker's doubts about some of ProCyte's science, he saidthe three-way merger would help maximize the value to ProCyteshareholders. He said ProCyte's cash and the proposed company's$50 million in annual revenues would result in a viable companygoing forward. Derma Sciences, of Old Forge, Pa., has annualrevenues of about $5 million, coming mostly from its zinc-basedwound-healing products. Scherer has four medical-related businesssegments and about $45 million in annual revenues.

Tucker said that, under Washington state law, shareholders owningat least 10 percent of a company's stock can require the calling of aspecial meeting.

Getting the 10 percent, he said, "will be a no-brainer. We'll have the10 percent tout suite. We have had contact with a number ofsignificant shareholders, and they are of the same mind as we are."

The stocks of Scherer (NASDAQ:SCHR) and Derma Sciences(NASDAQ:DSCI), both closely held and thinly traded, closedunchanged Friday at $19.63 and $5 per share, respectively.ProCyte's stock (NASDAQ:PRCY) also was unchanged, at $3 pershare. n

-- Jim Shrine

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