Ethical Holdings plc announced Tuesday that it has agreed toacquire Gacell Holdings AB in a share-for-share exchange worth$34.3 million.

Ethical Holdings of Godmanchester, U.K., issued 2.98 millionshares of its common stock (which trades as Americandepositary receipts, or ADRs) to effect the exchange, which itintends to account for as a pooling.

The acquisition gives Ethical Holdings, which specializes indeveloping transdermal and oral controlled-release and topicaldrug-delivery technologies, access to the oral controlled-releasetechnology proprietary to Gacell.

As well, Ethical Holdings has bought a company with profits.Gacell has six products on the market or under development,including formulations of morphine and diltiazem, and hasestablished license or supply and distribution agreements with18 companies.

Gacell of Malmo, Sweden, generated more than $4.6 million inrevenues for the first nine months of fiscal 1993 and about$872,000 in net income after taxes for the same period.

Ethical Holdings is also developing or marketing a number ofproducts configured in various drug delivery modes, includingverapamil for treating hypertension and steroid hormones fortreating menstrual disorders and osteoporosis. In addition, thecompany, through its 42 percent-owned subsidiary,Phytopharm, is developing phytopharmaceuticals derived fromplants primarily found in China.

Ethical Holdings staged an initial public offering of 2.5 millionADRs in the spring; the offering closed on April 1 with the ADRs(NASDAQ:ETHCY) going for $6 each. The stock gained $1.88 onTuesday to close at $13.63.

-- Jennifer Van Brunt Senior Editor

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