Scherer Healthcare Inc. officials, tired of what it perceives to bestonewalling tactics by ProCyte Corp., sent a letter to the Kirkland,Wash., company "demanding" to inspect ProCyte's shareholder list.

Scherer, of Atlanta, and Derma Sciences Inc., of Old Forge, Pa.,proposed a three-way merger with ProCyte on Dec. 8, and asked foran answer by Dec. 15. ProCyte officials have yet to satisfactorilyrespond or address the proposal, Robert Tucker, Scherer's chairmanand CEO, told BioWorld.

"They seem to be cordial, but cool," Tucker said. "We want to getthem to the table. Their shareholders need to know what we'retalking about. [ProCyte] will have to provide us with a shareholderlist. They can do some stalling, but we will eventually get it."

Karen Hedine, ProCyte's vice president, business development, toldBioWorld the company will have no comment as it relates to theScherer proposal. On Dec. 15, Joseph Ashley, ProCyte's presidentand CEO, said the company was under no obligation to answer inany set time frame. He said a response would be forthcoming afterProCyte heard back from its bankers and after the board had achance to meet.

Hedine said ProCyte has 58 employees and expects to end the yearwith $40 million in cash. She also said the copper-based companyexpects to take products into the clinic in 1995 for HIV,inflammatory bowel disease and hair loss. ProCyte's lead product,Iamin gel, failed in a diabetic plantar ulcer trial that was reportedOct. 17.

Derma Sciences, a zinc-based company in the wound-healingbusiness, has annual revenues of about $5 million per year. Schereris comprised of four business segments: surgical and medicalproducts, medical waste management, research and development,and consumer health care products. It has annual revenues of about$45 million.

Derma and Scherer, two closely held companies, recently bought640,500 shares of ProCyte stock, or nearly 5 percent of thecompany's 12.92 million outstanding shares. Hedine said Ashley isthe company's largest shareholder, with 660,890 shares.

"We want to start talking to other major shareholders," Tucker said."We want to get our story before the shareholders; we want to getout story before the board.

"ProCyte has $40 million they haven't spent in their development,"Tucker said. "That put in with the [proposed] ultimate companygives you a company with $50 million in revenues, $45 million incash and products that are coming out. In other words, an ongoingbusiness with a good solid balance sheet _ one that can sustainadversity and keep alive vs. a biotech company that's all alone.

"The mistake they're making is looking at Scherer today and notwhat it would be with the other companies."

ProCyte's annual shareholder meeting is in May. Tucker saidScherer is considering soliciting proxies in connection with thatmeeting. The merger would be done through a swap of Derma andProCyte stock for Scherer shares. n

-- Jim Shrine

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