Merck & Co., one of the world's largest pharmaceutical companies, said yesterday that it has decided to cancel an agreement with Columbia-based Martek Biosciences to screen its huge library of micro-algae for potential use in developing new drugs.
Whitehouse Station, N.J.-based Merck has been screening Martek's micro-algae for compounds and properties that might lead to new products since September 1994. The agreement was to have lasted until the end of this year, but Merck said it decided to drop the research project in favor of other efforts.
Alex Zisson, a New-York-based analyst who follows Martek for Hambrecht & Quist, said Merck's early cancellation shouldn't be viewed as a blow to Martek.
"It's not that meaningful. It was an early-stage research project in which Merck was randomly sampling extracts that Martek was sending them," Zisson said.
"Obviously it would be great if they'd found a sample that could be developed into a drug, but the screening process is very hit or miss and it doesn't necessarily mean that a compound won't be found that has drug potential," he said.
While shares of Martek's stock were down $1, closing yesterday
at $24.75, Zisson said Merck's decision shouldn't have a long-term effect on Martek's stock value.
The companies declined to disclose how much Merck had paid Martek for the right to screen the micro-algae library, one of the world's largest.
But Stephanie Diaz, Martek's comptroller, said cancellation of the agreement will result in only a small revenue loss to Martek -- $45,000. Analysts said Merck was paying about $8,000 a month to Martek.
The long-term value of the deal rested on payments that Merck would have had to make to Martek for late-stage research to develop specific drugs from Martek's micro-algae, and royalties on drugs that reached the market.
Diaz said she spoke with Merck officials late last week, and they assured her that Merck did not cancel the research project because it was dissatisfied with Martek's micro-algae library.
"They told me this was in no way a reflection of our micro-algae extracts, Diaz said.
The comptroller said the cancellation of the Merck project wasn't seen internally at Martek as a big blow. The company's budget for pharmaceutical research represents only 1 percent of Martek's entire research and development budget, Diaz said.
It also has an agreement, set to expire this year, with Genetics Institute, a small publicly traded company attempting to develop new drugs and therapies from proteins for blood disorders and cancer.
Martek's primary research effort, said Diaz, is developing nutritional products from its vast storehouse of 2,500 micro-algae organisms.
The company has deals with several of the major infant formula manufacturers to supply its first product, an additive it named Formulaid, for inclusion in formula products sold in Europe.
Most industry analysts expect the revenue from those agreements to move Martek, which lost $8.8 million in 1995, into the black in 1998.
Pub Date: 7/23/96