Cytogen Inc. has negotiated a takeover of CytoRad, a company set upas a financing mechanism for Cytogen, in an exchange of stock thatcould be worth about $40 million to CytoRad's investors.The merger, announced Friday, also gives Cytogen $16 million in cashfrom CytoRad, which will cease to exist, and ends a potential legalbattle over licensing rights to technology under development forprostate and ovarian cancer therapy. Cytogen said the deal is expectedto be finalized in the next several weeks.The agreement involves an exchange of about 6 million shares ofCytogen common stock for CytoRad's 4 million units, or 1.5 Cytogenshares for one CytoRad unit.CytoRad stockholders also get a warrant per unit to purchase Cytogen'sstock at $8 a share and the right to receive another one-half share ofCytogen. The warrant expires Jan. 31, 1997. Conditions for receivingthe right to one-half share depend on Cytogen's stock performance.Cytogen and CytoRad are in Princeton, N.J. Based on Cytogen's stock(NASDAQ:CYTO) at the close of trading Friday, 6 million shares wereworth about $26.25 million. The stock closed at $4.38 a share, down 50cents. Analysts also valued the warrant and the right to receive one-halfshare at about $2, giving the agreement a total estimated value of morethan $38 million.News of the merger sent CytoRad's stock (NASDAQ: CYTDZ) Fridayup $1.38 to $6 a share.CytoRad chairman and CEO William Ryan said, "I think this is areasonably good structure for CytoRad's stockholders."Ryan said CytoRad rejected as inadequate a merger offer from Cytogenin May. Between 1992, when CytoRad was formed, and the end of1993, CytoRad contributed $22 million to Cytogen's research anddevelopment.Ryan said CytoRad stopped sending money after Cytogen decided totake over the company this year, but could not afford to meet financialexpectations established in 1992 when CytoRad's units were first soldto investors.The battle that ensued involved not only CytoRad's $16 million incash, but rights to certain Cytogen technology that was licensed toCytoRad.Pam Murphy, Cytogen's vice president of corporate communications,said the merger is "in the best interest of both Cytogen and CytoRadstockholders."The $16 million in cash, she said, will be used, in part, to continuePhase III trials of two products, OncoSint prostrate cancer imagingagent and Samarium-EDTMP for bone pain associated with cancer.Murphy said Cytogen, expects to raise another $4 million through salesof about 900,000 shares of common stock to Fletcher Capital MarketsInc., of New York.Prior to the CytoRad merger and the sale of stock to Fletcher, Cytogenhad about 23 million shares outstanding.According to Cytogen's second quarter earnings statement, releasedThursday, the company reported it had about $18.1 million in cash,liabilities of $9.3 million and a burn rate of $7 million for the quarter.n

-- Charles Craig

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