Nova plans merger with Calif. firm New headquarters to be on West Coast

May 14, 1992|By Liz Bowie | Liz Bowie,Staff Writer

An article in The Sun yesterday incorrectly reported that Dr. Solomon H. Snyder, a neuroscientist at Johns Hopkins University, was a Nobel Prize winner.

* The Sun regrets the error.

Nova Pharmaceutical Corp., the home-grown drug company that came to symbolize the promise of Baltimore's future as a life sciences center, will be acquired by a California biotechnology company.

The corporate headquarters of the new company, to be called Scios-Nova Inc., will be in Mountain View, Calif., but a research and development center with strong ties to the Johns Hopkins University will remain in Baltimore, the companies said yesterday.

Whether any of Nova's 330 employees will lose their jobs remains unclear, as do many of the details of what the two companies say is a merger of equals.

But Hans Mueller, Nova's president and chief executive and a leader in the efforts to reshape the city's economic base, said he will stay in Baltimore as vice chairman of Scios-Nova Inc.

Some analysts and business leaders see the acquisition by Scios Inc. as a setback for the fledgling biotechnology industry in the Baltimore region, which is trying to attract enough companies to make it a nationally recognized center. But others predicted that the merger could produce more jobs and manufacturing for the city.

"I don't think it is the death knell for biotech in the state," said

Walter A. Plosilla, who heads the Suburban Maryland Technology Council. "But this was the anchor pharmaceutical company in the city. It has to be cause for concern."

Nova was one of the city's earliest biotechnology companies, springing to life in 1982 from the laboratories of a Nobel Prize-winning scientist, Dr. Solomon H. Snyder, a neuroscientist

at Hopkins.

Like dozens of other biotechnology companies, Nova promised blockbuster new medicines to treat illnesses such as schizophrenia, rheumatoid arthritis and septic shock. But the company appears to be years away from turning the fruits of Dr. Snyder's laboratories into marketable products.

Despite the lack of commercial success, however, investors have been glad to pour money into the dream. The company has $43 million in cash.

Officials of both companies consider the merger a marriage of convenience. Nova is strong in developing synthetic drugs using more traditional research approaches and needs additional money to finance long-term projects.

Scios Inc., formerly called California Biotechnology Inc., has that money -- $122 million in cash -- and an approach to drug development that uses the traditional biotechnology tools, including molecular biology.

Together, company officials said, Nova and Scios will become a major biotechnology company, large enough to produce a broad range of new drugs at regular intervals and to market their products in Japan and Europe.

Dr. Mueller and Scios Chief Executive Richard L. Casey have known each other for years, but the merger was put together in the past eight weeks, after Dr. Mueller called Mr. Casey, both men said yesterday.

The work of the two companies could fit well together, said Merrill Lynch analyst Maureen McGann. Scios, with 187 employees, is working on wound-healing products that could fit into Nova's focus on inflammatory disease. And both companies are developing drugs to treat disorders of the nervous system.

The merger, she said, was a cheap way for Scios to beef up its portfolio. "That is why I believe it was positive for Scios," she said.

The market disagreed, however. Stocks of both companies fell. Scios' stock closed at $11.625 a share, down $1.625. Nova fared little better yesterday. Its stock lost 62.5 cents, closing at $4.50.

The stock transaction, valued at $180 million, awaits approval of the shareholders of both companies at a special meeting in August.

Nova stockholders would exchange each of their Nova shares for 0.39 shares of Scios, whose shareholders would end up owning 60 percent of the new company.

Scios had 14.6 million common shares outstanding at the end of last year; Nova had 32 million shares as of early March.

John W. Culligan, chairman of Scios, and Mr. Casey, who is also president of Scios, will maintain those positions in Scios-Nova. Dr. Snyder will be on the new board.

The merger is considered to be consistent with the way the industry is expected to mature as small companies join forces to strengthen their ability to develop products and technologies.

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