Two companies doing well by themselves decided that they woulddo even better together, the CEOs of NeXagen Inc. and Vestar Inc.said Monday in announcing a definitive agreement to merge.The strength of NeXagen, of Boulder, Colo., is its drug-discoverycapability based on its patented SELEX (systematic evolution ofligands by exponential enrichment) technology. Vestar Inc., of SanDimas, Calif., has focused on liposomal formulations of currentlyavailable drugs. Its strength, as opposed to NeXagen's, is an abilityfrom late preclinical development through marketing.The combined company's proposed name is NeXstarPharmaceuticals Inc. and would be based in Boulder. Officials at thecompanies set February as the merger target date, subject toregulatory and shareholder approvals. The merger will take placethrough an exchange of .88 shares of NeXagen stock for each shareof Vestar.NeXagen (NASDAQ:NXGN), which has 10.6 million sharesoutstanding, reported $36 million in cash and marketable securitiesas of June 30. Its stock price closed at $7.88 per share Monday, up13 cents. Vestar (NASDAQ:VSTR), which has 13.9 million sharesoutstanding, reported June 30 cash and securities of $13.1 million,and six-month revenues of $20.3 million. Its stock price closedMonday at $5.30, up 5 cents per share."If you look at all the various components, we have all the skillpositions covered," Michael Hart, Vestar's acting CEO, toldBioWorld. "When you look at going from drug discovery throughbooking that sale, we have all the aspects covered in the combinedcompany. I think it's a very powerful team to aggressively pursuenew products."Patrick Mahaffy, CEO of NeXstar and designated CEO of the newcompany, told BioWorld that the companies have worked togetherinformally in the past in areas related to the potential uses of theirtechnologies. "Two or three months ago we started discussionsrelated directly to this merger. It wasn't really either of us shoppingaround."The two men said the combined company most likely will retain all170 Vestar employees and all 130 working at NeXagen. Togetherthey will have access to 50,000-square-foot facilities in Boulder andSan Dimas, as well as a 50,000-square-foot manufacturing facilitybeing built in San Dimas.NeXagen, founded in 1991, has at least four significantcollaborations related to its discovery technology. But it lacks theinternal ability to move the products forward."Our strengths are what they needed and their strengths are what weneeded."What Vestar needed, Hart said, was something to augment itsliposome-based technology, which could be taken only so far. "Howmany drugs are you going to encapsulate into liposomes?" Five to10, perhaps, he answered. "We're looking at developing drug-discovery capability internally, and that's what NeXagen possesses."Vestar's lead product is AmBisome, a liposomal formulation of thesystemic antifungal agent, amphotericin B. It's approved in 10mostly European countries for treatment of severe fungal infectionsin immuno-suppressed patients. It has completed Phase III trials inthe U.S., where a new drug application for Kaposi's sarcoma isexpected to be filed by the end of the year or early next year.Another product, DaunoXome, is a liposomal formulation of theanti-cancer drug daunorubicin. It is being market in Europe on anamed-patient basis. Vestar currently is seeking approval of the drugthere for Kaposi's sarcoma. It is developing AmBisome andDaunoXome for other indications, as well as a Taxol equivalent andother drugs.NeXagen focuses on novel oligonucleotide-based drugs. Its SELEXtechnology involves making high-affinity nucleic acid ligandstargeting small molecules that can be used to rapidly identify leadcompounds.NeXagen entered into a 3.5-year collaboration with Eli Lilly & November 1992 to discover and develop ligands that bind to aspecific target in Lilly's oncology program. Three-year pacts weresigned in 1993 with Becton Dickinson & Co., of Franklin Lakes,N.J., related to development of in vitro diagnostic products; and withSchering AG covering in vivo diagnostics and radiotherapeutics.NeXagen's deal with Progenesys _ a joint venture betweenSyStemix Inc. and Sandoz Pharmaceutical Corp. _ involves genetherapy delivered by viral vectors for AIDS.NeXagen, by itself, is developing inhibitors of angiogenesis-relatedgrowth factors. Mahaffy said the company hopes to file aninvestigational new drug application by the end of 1995. n

-- Jim Shrine

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