Genzyme Transgenics Corp. plans to acquire TSI Corp., a contractresearch organization, for a stock swap valued, as of Tuesday's closingprice, at $27.5 million, the companies announced Wednesday. The dealis subject to shareholder and regulatory approval.TSI shareholders will exchange five shares of stock for one share ofGenzyme Trangenics. There are about 22 million shares of TSI(NASDAQ:TSIN) outstanding and 5.5 million shares of GenzymeTrangenics (NASDAQ:GZTC). The purchase will result in the issuanceof 4.4 million new shares of Genzyme Transgenics, which closedWednesday down 75 cents at $5.50. TSI was up 6 cents, closing at 94cents per share.Genzyme Corp., the parent company of Framingham, Mass.-basedGenzyme Trangenics, will have its ownership share reduced from 73percent of the outstanding shares to 40 percent.TSI revenues are about $50 million per year, but the Milford, Mass.,company has had a number of financial and operating setbacks over theyears. It reported a $26 million loss in the quarter ending March 31,1993, about $17 million of which was in a restructuring charge. BobBaldridge took over as chairman and CEO in April 1993."While we've stabilized the company, we're still in need of financialstrength," Baldridge told BioWorld. "One of the reasons we're doingthis is to associate with a company with a stronger balance sheet so wecan continue to do the things we're trying to do. We think there areeconomic and scientific reasons that make this a good fit."Genzyme Trangenics' president and CEO, Jim Geraghty, toldBioWorld, "We think the management team there today has done anexcellent job streamlining the company, improving productivity andfocusing the operations. We intend to support (TSI) management'scurrent plans."The primary challenge is to increase revenues _ to grow thecompany and expand its capabilities," Geraghty said. "We bring somefinancial stability, and are committed to investing in things such assystems upgrades that are going to both reduce cost and increase thecompetitiveness of TSI offerings."But more than revenue, Geraghty said, the most significant value of theacquisition is in the integrated services the combined company will beable to provide in terms of developing, producing and testing products.Genzyme Transgenics, which has at least nine active collaborationsongoing, develops methods of producing therapeutic proteins in themilk of animals. It already has reported expression levels of 7 gramsper liter of recombinant human antithrombin (AT-III) in the milk oftransgenic goats, and hopes to have AT-III in human clinical trials inlate 1995. It also has reported successful production of tissueplasminogen activator (t-PA) in the milk of transgenic goats, the cysticfibrosis transmembrane regulator (CFTR) protein in transgenic mice,and has expressed monoclonal antibodies in mice at more than 10grams per liter, Geraghty said.TSI will continue its operation as a wholly owned subsidiary ofGenzyme Trangenics, and the management teams of both companieswill be retained, the companies said. Baldridge, who will be vicechairman of Genzyme Transgenics, and another TSI board memberwill sit on Genzyme Trangenics' board. TSI's chief financial officer,Steven Shedd, will be chief financial officer of Genzyme Transgenics.

-- Jim Shrine

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