With a few notes of dissent, shareholders of Scios Inc. and NovaPharmaceutical Inc. separately approved a merger of the twocompanies Thursday morning.

The rechristened Scios Nova Inc. laid out an ambitious strategyfor a leaner operation that aims to take at least a half-dozenhomegrown drugs into clinical trials by 1995 and usher fiveothers, now in clinical trials, into the market by late in thedecade. The company hopes by 1997 to grab an additional$100 million in sales from acquired products.

"This is going to be one of the top five biotechnology companiesin the next five years," predicted Richard L. Casey, Scios'president and chief executive, who inherits the same positionsin the new company.

If Scios Nova hits most of its objectives, shareholders of thecombined company can expect it to post its first profit sometime between 1995 and 1997, Casey said after the Sciosmeeting in Mountain View, Calif. By the year 2000, heenvisions Scios Nova hitting $1 billion in sales and $200 millionto $300 million in profits.

Scios Nova is setting out toward these goals with about 20percent fewer employees. The Nova payroll is taking adisproportionate hit. Its Baltimore operation will become aresearch facility, but all of its administrative functions will bescrapped or consolidated in Mountain View. Between 70 and 80employees will be cut, leaving about 300 in the combinedcompany.

Casey also said he was not dismayed that about 28 percent ofthe shares voted by Scios shareholders opposed the merger.(About 55 percent of eligible shares were voted.) Many ofthose votes were cast by two unnamed large institutionalshareholders -- "two people" who manage those funds -- whodon't have faith in the viability of Nova's products, Casey said.

"That's one of the main reasons we did this," he said of Nova'sproducts. "Merging with Nova brings us a substantial pipelineof products."

Some shareholders questioned if Scios Nova might not betaking on too much, spreading its development efforts too thinover so many product areas.

Casey defended the strategy, saying the company needed toadvance on several fronts to ensure that its fate, unlike that ofsome biotechnology companies, didn't hinge on the success ofone or two products.

Products that show favorable preclinical or early clinical resultsshould attract outside financial support, if needed, he said.Starting out with about $150 million in cash, Scios Nova wasbetter positioned to drive harder bargains on collaborationswith other companies than if it were on its own.

In addition, the merged company plans to put some projectsout to license or outright sale, Casey said. One area for possibleout-licensing is bioerodible polymers, which are beingdeveloped for localized drug implants at the site of braintumors or in bone marrow.

Scios Nova has developed plans to package several drugs forcentral nervous system conditions into a venture capital-backed spinoff company, Casey said. Some products are nearingclinical trials.

Scios Nova plans to concentrate on four major drug productareas: cardiovascular disease, inflammation, metabolicdisorders and tissue repair.

Under the merger, Nova shareholders will exchange each Novashare for 0.39 of a share of the new company, giving Novashareholders a 40 percent stake in the new company.

Scios shareholders approved the issuance of 12.5 million newshares for the merger, which will bring Scios Nova's totaloutstanding stock to 31 million shares. Up to 4 millionadditional shares could ultimately be needed to Nova's publiclytraded Class C and Class D warrants, and to buy out investorswith interests in a limited partnership and other developmentprojects, Casey said.

Starting today, the effective date of the merger, the combinedScios Nova Inc. will trade under the NASDAQ symbol SCIO.

-- Ray Potter Senior Editor

(c) 1997 American Health Consultants. All rights reserved.

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