Pharmatec Inc. and Pharmos Corp. said Thursday that theyhave entered into a definitive merger agreement.

Terms of the previously announced agreement were modifiedslightly to increase the number of Pharmatec shares thatPharmos shareholders will receive. Under the new terms,Pharmos shareholders will receive about 12.5 million shares ofPharmatec stock (NASDAQ:PHTC) in exchange for all 16.3million Pharmos shares outstanding.

This is based on an exchange ratio of 0.765 share of class Bcommon stock of Pharmatec for each share of Pharmos stock.The originally proposed ratio was 0.75 share of Pharmatecstock for each Pharmos share.

The deal could be worth about $37.5 million, based onPharmatec's closing price of $3 on Thursday. When the dealwas announced in February, its value was about $53 million,based on Pharmatec's price of $4.38.

The merger will combine Alachua, Fla.-based Pharmatec's drugdelivery technology with Pharmos' drug formulation expertise.Pharmatec will change its name to Pharmos and will have 24.8million shares outstanding.

New York investor David Blech has a significant stake in bothcompanies. Privately held Pharmos is based in New York.

The companies have also entered into an option agreement topurchase Xenon Vision Inc., which is developing site-specificophthalmic drugs. Following the acquisition, the new companywill have 26.8 million shares outstanding.

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