Pharmatec Inc. and Pharmos Corp., two companies in whichinvestor David Blech has substantial equity interests, saidThursday that they have entered into a letter of intent tomerge.

The proposed stock swap could be worth about $52.6 millionbased on Thursday's closing price of $4.38 for Pharmatecshares. The stock (NASDAQ:PHTC) was down 25 cents.

Under the proposed terms, the Alachua, Fla., company wouldissue 0.75 shares of a new class of convertible common stock,for a total of 12 million Pharmatec shares, in exchange for eachof the 16 million Pharmos shares outstanding. Trading of thenew shares would be restricted for 15 months following themerger, and thereafter would automatically convert to an equalnumber of common shares. Before the merger, Pharmatec has12.3 million shares outstanding.

The merger will combine Pharmatec's drug delivery technologywith Pharmos' drug formulation expertise, said MarcusBrewster, director of research and development at Pharmatec.

Pharmatec's redox dihydropyridine carrier is a lipophilicsubstance that crosses the blood-brain barrier and, moreimportantly, stays behind the BBB, where it slowly releasescompounds, said Brewster.

Pharmatec has developed estradiol, anti-viral and anti-bacterial compounds combined with the carrier. The estradiolcompound has been through Phase I trials in the UnitedKingdom for menopausal hot flashes, but Pharmatec hasn'tpicked a lead compound for development, said Brewster.

Privately held Pharmos' Sub-Micron Emulsion (SME) technologyallows the building of very small lipid particles encapsulatinglipophilic drugs, said Stephen Streber, co-chairman of Pharmos."The SME technology is ideally adapted to formulatePharmatec's drugs," he told BioWorld.

After the merger, Pharmatec will have $15 million in cash,including $10 million from Pharmos of New York, saidPharmatec President Bruce Barron.

If the deal is completed, Blech will own 40 percent of themerged company. He now owns 60 percent of Pharmateccommon stock and 19 percent of Pharmos shares. He also holdsoptions and warrants to purchase an additional 8.8 millionPharmatec shares.

The merger is subject to conditions, including negotiation of theexchange ratio and approval of the merger by the directors andshareholders of each company.

-- Karen Bernstein BioWorld Staff

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