British company to buy Md. firm Deal for Pharmavene may bring $160 million

February 28, 1997|By Mark Guidera | Mark Guidera,SUN STAFF

In one of the largest deals for a Maryland biotechnology company, a British pharmaceutical firm yesterday announced it will pay as much as $160 million for Rockville's Pharmavene Inc., which has never turned a profit.

The deal with Shire Pharmaceuticals Group PLC indicates how potentially lucrative is Pharmavene's "drug delivery technology," which manipulates a drug's molecules to better target diseases.

If the merger is approved by shareholders of both companies, Shire initially will pay $25 million in cash and about $65 million in Shire stock for privately held Pharmavene.

But the price could reach $160 million if certain contingencies are met.

Those include Food and Drug Administration approval for Carbatrol, a drug developed by privately held Pharmavene for epilepsy, and successful development of drugs for cardiovascular disease.

If successful, Carbatrol and the cardiovascular drugs alone would trigger an additional $70 million payment from Shire, said James D. Russo, chief financial officer at Pharmavene.

FDA approval of Carbatrol would trigger $2 million from Shire to Pharmavene. The Rockville company also would get an $8 million payment from Athena Neurosciences Inc., of San Francisco, which licensed Carbatrol for marketing prior to the Shire deal.

The merger agreement is a big financial success for Healthcare Ventures, the Edison, N.J.,venture capital firm, which is Pharmavene's principal stockholder and largest investment backer.

The most ever paid for a Maryland biotechnology company was the $295 million spent in 1995 by the Swiss pharmaceutical giant Sandoz for Genetic Therapy Inc., of Gaithersburg.

Reformulating drugs

Pharmavene's strategy has been to select drugs with large potential commercial value that are no longer covered by patents, and to attempt to molecularly reformulate them so they will have a more predictable and lasting effect.

The field has grown enormously competitive in recent years and many major pharmaceutical companies have teams devoted to it. By some estimates the market for drugs improved by the technology will grow to $18 billion worldwide by 2000.

Publicly held Shire Pharmaceuticals specializes in developing treatments for diseases associated with aging, such as osteoporosis and Alzheimer's disease.

"The Pharmavene acquisition will provide us with the advantages of flexibility and refinement for our own product line," said John Fletcher, corporate communications director at Shire's headquarters in Andover, England. "It also gives us an important foothold in the U.S. market."

Shire's biggest purchase

The purchase is considered the largest and most important for 11-year-old Shire, said Fletcher.

The company made two previous acquisitions, in 1993 and 1995, as part of its growth strategy. Both were British companies.

Shire expects Pharmavene's drug delivery technology to add a marketing edge for its products, said Fletcher.

As for Pharmavene, it gains a parent with a growing marketing arm and experience with the regulatory approval process in two big markets, the United Kingdom and the rest of Europe, said Krystyna Belendiuk, senior vice president for business development at Pharmavene.

"We are very, very complementary companies," said Belendiuk. "We both seek to develop products that can be brought to the market quickly. We are low-risk, big-market oriented."

The Rockville company's drug development pipeline will add significantly to Shire's.

Together, the companies will have 30 prospective products. Pharmavene has 12 drugs in development, including treatments for epilepsy, diabetes, and viral infections.

FDA approval expected

It has no approved products, though Carbatrol, the epilepsy treatment licensed to Athena Neurosciences, a subsidiary of Elan PLC of Ireland, is expected to receive FDA approval this year. The company also is working on drugs for osteoporosis.

Shire's product pipeline also includes hormone replacement therapies and the Alzheimer's treatment, which it is co-developing with a subsidiary of Johnson & Johnson.

Fletcher said Shire intends to keep Pharmavene in Rockville, though its name will change to Shire Laboratories Inc.

The acquisition should mean staff growth on both sides of the Atlantic, executives at both companies said.

Shire employs 123 people, 40 of them in sales and marketing -- services 7-year-old Pharmavene lacks.

Pharmavene is primarily a research and development company with about 60 employees.

The company canceled a public offering of 2.2 million shares last summer because of a sudden market downturn, said Russo.

Pub Date: 2/28/97

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