A Gaithersburg biotechnology company that has experienced chronic debt during its 14-year existence, Genex Corp., has placed itself on the selling block.
The investment banker Allen & Co. Inc. has been retained to arrange a purchase or merger involving Genex, as well as to explore any other options, Genex announced yesterday. Allen & Co. is concentrating on a deal with corporations in the United States and in Europe. Techno-Venture Co. Ltd. of Tokyo has been retained to look for prospective Japanese buyers or partners.
"Against the backdrop of a very tough financial environment, we have so far been unable to meet our financing needs," Reed Prior, Genex's president and chief executive officer, said in a prepared statement. "We have thus concluded that the retention by the company of an investment banking firm to help us actively pursue a possible sale of the company, as well as other financial alternatives, is in the best interests of our shareholders at this time."
Genex concentrates on engineering new or improved proteins for use in biological research, pharmaceuticals and medical applications.
A pivotal event in Genex's financial history took place in 1984, the same year the company managed its first black ink, a $3.7 million third-quarter profit. A multimillion-dollar deal Genex had forged with G. D. Searle & Co. abruptly ended when Searle announced that the contract wouldn't be renewed.
Genex had been supplying Searle with L-phenylalanine, an amino acid used in the production of aspartame, a Searle low-calorie sweetener also known as Nutrasweet. Genex, which had viewed the pact as its ticket out of the contract research and development business and into the manufacture and sales of specialty chemicals, had spent $25 million on a production plant in Kentucky.
The company never fully rebounded from losing the contract to supply Searle with L-phenylalanine, a substance that accounted for 59 percent of Genex's revenues in 1984 and generated 87 percent of the company's sales in the first two quarters of that year.
"Genex had high hopes and expectations and was thought to be one of the survivors and emerging leaders in the biotech field, but then, of course, they stumbled with their raw-material production for Nutrasweet and almost went bankrupt," said Eugene Melmitchemko, an analyst with Legg Mason Wood Walker Inc.
"They were somewhat different -- they were trying to make a distinction between themselves and other companies by concentrating on specialty chemicals."
Other deals subsequently brought Genex millions of dollars, but never enough to prevent losses. A restructuring in 1987 brought in $9 million and gave a group of outsiders substantial control over Genex's management and ownership.
The following year, a drain opener known as Kerazyme was sold to a distributor in an arrangement worth $3.8 million over five years. However, Genex lost $3.3 million in 1987 and $8.4 million in 1988.
Genex closed at 12 1/2 cents yesterday in over-the-counter trading.