GenVec Inc. and Theragen Inc., two privately held companies,announced Wednesday that they have agreed in principle to merge,marking the first such union involving gene therapy companies.The presidents of each company said the merger is expected to befinalized by the end of May or shortly thereafter, contingent uponapproval by shareholders of each company. Theragen stockholders willreceive GenVec stock. The companies will be consolidated inRockville, Md., home of GenVec, which was launched in March 1993.Theragen, formed in 1991, is based in Princeton, N.J.Financial terms of the merger were not disclosed.Officials from both companies said the consolidation of talent andresearch immediately places GenVec at the forefront of the genetherapy industry. Both companies are involved in in vivo gene therapydelivery systems, including four of the most widely used and studiedvector systems.Michael Walsh, an analyst with Robertson, Stephens & Co. of SanFrancisco, wasn't as enthusiastic about the merger, at leastimmediately, as those involved."It's good to have multiple vector systems and multiple disease areas togo after but most of them are still early," Walsh said. "The problemwith having so many vector systems is you have to spread yourresources."On the upside, he said, is that there has been some thinning in a field inwhich it is getting harder for investors to differentiate amongcompanies."My feeling is there are too many gene therapy companies out thereand it's nice to see some consolidation," said Walsh, who expectsfurther consolidation in gene therapy. "I have high hopes for the field,but I still think it's early."Theragen has developed proprietary delivery systems in the herpessimplex virus, adeno-associated virus and liposomes. GenVec hasexpertise in the in vivo delivery of genes using adenovirus. They planto focus on three disease areas: lung, cardiovascular and cancer, andgenerate commercial revenue opportunities by licensing out discoveriesin other areas."Most of the other gene therapy companies are using retroviral vectors_ an ex vivo approach," Martin Cleary, president and chief executiveofficer of Theragen, told BioWorld. "My sense is that those companieswill find their vector systems are not going to be of great utility. Invivo is much more efficient, easier to administer, more likely to besafer in patients and far more effective."Thomas D'Alonzo, president and chief executive officer of GenVec,will be CEO of the combined company, which will be called GenVecInc."No one vector is going to sweep the field," D'Alonzo told BioWorld."Depending on the disease and particular target organ, it's clear thatmore than one vector is going to be required to capture the commercialpossibilities presented by gene therapy."Cleary said a key in the merger is the bringing together of scientificpersonnel _ most notably Ronald Crystal, GenVec's chief scientificofficer, founder and in vivo gene therapy pioneer, who is chief of thedivision of Pulmonary and Critical Care Medicine at the New YorkHospital-Cornell Medical Center; and Joseph Glorioso, a Theragenscientific adviser and chairman of the Department of MolecularGenetics and Biochemistry at the University of Pittsburgh School ofMedicine.GenVec was started with $8.5 million in initial financing and acollaboration with an industry leader, Genentech Inc., which willprovide up to $17 million in research support, milestone payments andfuture equity investments in exchange for worldwide marketing rightsto gene therapy products developed for cystic fibrosis (CF).Theragen has a research collaboration and product developmentagreement valued at $3 million with Parke-Davis Co., a division ofPlains, N.J.-based Warner-Lambert Co., a major shareholder in thecompany.Crystal is directing a Phase I trial of the adenovirus vector for CFpatients under an NIH protocol.The combined company expects to have a GenVec second-generationvector for CF in clinical trials by the end of the year, and have twoothers in clinical trials for cancer in 1995.In addition to the prospects of nearer-term revenue in the form oflicensing fees and research arrangements for products outsideGenVec's focus area _ and longer term revenue from products on themarket, the company is considering going public this summer or assoon as market conditions permit. If not, the company would offershares privately."The company is well-financed and the combined company is inexceedingly fine position to raise money this summer," D'Alonzo said."We're not under any pressure or urgency in a financing context."The financial challenge, he told BioWorld, will come 2 to years downthe road when products are in clinical trials.
-- Jim Shrine
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