Bristol-Myers has resolved a major sticking point in its proposed acquisition of a Seattle biotechnology firm, the companies said Monday.
The agreement among Bristol-Myers, Genetic Systems and Syntex, a Palo Alto-based drug maker, adds at least $15 million to the price that Bristol-Myers is paying to add Genetic Systems to its stable of drug and health-care endeavors. Stockholders of Genetic Systems are scheduled to vote Feb. 13 on the merger with Bristol-Myers. In that deal, each Genetic Systems share would be exchanged for Bristol-Myers stock valued at about $10.50, for a total of $294 million.
Bristol-Myers' merger proposal came only a few months after Genetic Systems and Syntex had entered a definitive agreement that called for Syntex to pay $40 million for 18% of Genetic Systems. The pact announced Monday by the three companies dissolves that earlier agreement.
Bristol-Myers has agreed to pay $15 million in cash to Syntex for that company's one-third interest in Oncogen, a research and development partnership formed by Syntex and Genetic Systems in 1983. Less than a year ago, Bristol-Myers paid $12.75 million to become a one-third partner in Oncogen.
The new agreement also provides for Syntex to be paid up to $10 million in royalties on any cancer diagnostic or treatment products that may be invented or discovered by Genetic Systems or Oncogen.
Bristol-Myers, whose health-care products, toiletries and beauty aids generated $4.2 billion in revenue in 1984, is the leader in the market for anti-cancer pharmaceuticals. But analysts have said Bristol-Myers needs a strong biotechnology division now to develop the next generation of products.
Genetic engineering is a "necessary technique for (Bristol-Myers) to have in place to be successful, long term, in the anti-cancer field," said Munro W. Pitt, an analyst with Duff & Phelps, a Chicago-based investment firm.
Bristol-Myers currently does some biotechnology research, but industry insiders have questioned the strength of that unit and analysts have said the company needed to acquire the technology from outside sources. Biotechnology uses sophisticated techniques to rearrange genetic structures in an attempt to duplicate, synthesize or improve naturally occurring substances or behaviors.
Many biotechnology companies are concentrating on cancer diagnosis and treatment products; Genetic Systems' work primarily involves monoclonal antibodies.
The purchase of Genetic Systems "seems like a lot of money for a company that doesn't generate cash," Pitt said. "But if you look at all the biotechnology companies these days, you'll see there are no cheap ones."
The Bristol-Myers deal is one of two such proposed acquisitions. A merger between drug giant Eli Lily and Hybritech, a San Diego genetic engineering company, also is pending. Analysts say the mergers highlight a continuing trend of links between traditional pharmaceutical houses and the young biotech industry.
Two weeks ago, Thoratec Laboratories of Berkeley said it was making itself available for acquisition by a company that had sufficient marketing and financial resources to commercialize Thoratec's technology.