Nova Pharmaceutical starts new life Name changes to Scios-Nova in Calif. merger

September 04, 1992|By Liz Bowie | Liz Bowie,Staff Writer

Nova Pharmaceutical Corp., the pharmaceutical company that became the cornerstone of Baltimore's future as a biotechnology center, was acquired by Scios Inc. of Mountain View, Calif., yesterday and was immediately slated to be broken up into a number of new companies.

Richard L. Casey, the president and chief executive of Scios Nova Inc., said he wants to focus the new company's scientific research more sharply by divesting at least two and perhaps three segments of Nova.

However, he said, "we intend to have a major research and development facility in Baltimore for a very long time. There is no intention to consolidate out here in California."

The transaction was labeled a merger, but much of the management of Nova will be laid off and only three members of the board will be given positions on the Scios Nova board. In all, about 30 Nova employees, including senior executives and some of the other 140 workers in Baltimore, will lose their jobs in the next several months, according to company officials.

Baltimore might also lose one of its most respected biotechnology business leaders, Hans Mueller, Nova's chief executive since 1985. Dr. Mueller, who had become an avid proponent of city and state efforts to build the region's economy on the life sciences, said he will remain with the company for six months and hopes to find a new job in Maryland after that.

The merger, which was announced in May, was approved yesterday by shareholders of both companies in separate votes in Mountain View and Baltimore. For each Nova share, stockholders will be given 0.39 share in Scios.

Nova stock lost 12.5 cents in trading yesterday, closing at $3.375, and Scios ended the day unchanged at $8.875. The new company begins trading today on the NASDAQ system under the symbol SCIO.

The merger was essentially a marriage of convenience. Nova had a bounty of promising science, and Scios had plenty of cash -- about $150 million.

The merger enables Nova's technology to get to market, Dr. Mueller said. "It gives us $150 million to succeed with completion of the development of key products. In return, we are giving up 55 percent of the company."

Last year, Nova realized it needed at least $150 million to take several of its products through the testing stages required by the U.S. Food and Drug Administration. And at its current rate of research expenses, it would have run out of cash in a couple of years and been forced to raise money through a public offering or by merging with another company.

"The market for biotechnology funding is essentially dead," and there is no assurance it will pick up soon, Dr. Mueller said. As a result, he said, the board decided that the best option was a merger that would keep some company presence in Baltimore.

"We have tried to balance the needs of the shareholders with the needs of the community and the employees," Dr. Mueller said.

Scios Nova will initially focus on getting a group of Nova's anti-inflammatory drugs to market. It plans to pour money into research and clinical trials for these drugs, which treat rheumatoid arthritis and asthma. And it hopes to keep a line of psychiatric drugs, which Nova sells through a licensing agreement with SmithKline Beecham. Those products now bring about $40 million in revenues a year.

But much of the rest of the company might be sold off, according to a plan outlined yesterday by Mr. Casey.

Mr. Casey said Scios Nova has already begun working with Solomon H. Snyder, a Johns Hopkins University scientist, to spin off the piece of Nova that concentrates on developing drugs for central nervous system disorders. It was Dr. Snyder's research in that area that formed the core of Nova when it was founded in 1982.

Mr. Casey said he is looking for a new chief executive, research scientist and private capital for the company, which is expected to be spun off within the next year.

While the central nervous system research might prove fruitful, Mr. Casey said that the risks were too great for a long-term investment by Scios Nova and that it could be years before a product gets to market. Scios Nova "must be profitable within three to five years," he said.

Another Nova line of drug delivery systems, including a small dissolving wafer that can release cancer-fighting drugs in the brain, will be sold off as well. Scios Nova hopes to apply for FDA approval for the drug delivery systems soon. If the company is offered enough money for them, it will sell them off as well.

The new company also expects to follow through on Nova's plan to sell NovaScreen, a laboratory technique that uses robots to help screen hundreds of compounds for their possible use in medical research, probably this year. A local company, which Dr. Mueller declined to name, is negotiating for the NovaScreen unit, which has 15 employees.

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