SAN DIEGO — Paving the way for a windfall that could mushroom to $413 million for their ownership stake, Hybritech shareholders Tuesday overwhelmingly approved Eli Lilly & Co.'s acquisition of the monoclonal antibody manufacturing and marketing company.
The acquisition of Hybritech by Indianapolis-based Lilly was approved by more than 99% of shareholders who voted. Hybritech, created in 1977 with just $300,000 in capital, could begin operations as a Lilly subsidiary as early as today.
The deal was announced in September but delayed when the two companies failed to conclude negotiations before a self-imposed Jan. 1 deadline.
An early indication of how the match-up could work was provided by the performance of Hybritech's stock, which ended its last day of trading on Tuesday by hitting a new high of $37.125 with 56,000 shares traded.
Hybritech's stock had been trading at about $25 before the acquisition announcement by Lilly.
Much of that stock growth has been generated by two parts of the complicated purchase agreement, which Lilly and Hybritech initially valued at $32 per share. Shareholders will receive a combination of cash, warrants for Lilly stock and contingent-payment units which, depending upon Hybritech's future sales and gross profits, could pay as much as $22 per unit.
To Be Traded on Amex
Although the Lilly warrants might begin trading on the New York Stock Exchange as soon as today, a Lilly spokeswoman said that Hybritech shareholders probably won't receive warrants, cash and contingent-payment units until required paper work is transferred in about three weeks. The contingent-payment units will be traded on the American Stock Exchange.
However, both the Lilly warrants and the contingent-payment units have been trading "actively" in the over-the-counter market on a "when-issued" basis, according to Marshall S. Geller, managing director of the Chicago office of Bear, Stearns & Co.
On Tuesday, the five-year warrants for Lilly stock were being traded at between $7.25 and $8 on Tuesday, and the contingent-payment units were being traded between $4 and $4.50, Geller said.
Hybritech Chairman Howard E. Greene Jr. said on Tuesday that the stock market enthusiasm is driven by the belief that Hybritech and Lilly will be a "perfect fit."
Greene said discussions that led to the acquisition began when a mutual friend introduced him to Lilly Chief Executive Richard Wood.
"We began to compare notes and the more we began to look at what the two companies are doing, the more exciting the prospects began to look," Greene said. "We'll have the ability to exploit our technology and get new medicines to patients. This is going to accelerate things and our shareholders got an extremely attractive deal."
Hybritech was formed in 1977 by Howard Birndorf, a medical researcher at UC San Diego Medical School, and Dr. Ivor Royston, head of medical oncology at San Diego Veterans Administration Medical Center. The two were interested in research that would produce monoclonal antibodies that could be used to perform diagnostic testing, as well as to cure diseases.
On Tuesday, Greene suggested that no one associated with the then-fledgling company knew "just how truly phenomenal" monoclonal-antibody technology would become.
Hybritech, which went public in 1981, posted a $1.1-million net profit--its first and only profitable year--in 1984. Burdened by costs generated by the acquisition, Hybritech recorded a $700,000 net loss for fiscal 1985.
Wholly Owned Subsidiary
Lilly, which will operate Hybritech as a wholly owned subsidiary, also owns San Diego-based IVAC and Advanced Cardiovascular Systems in Temecula.
The acquisition by Lilly will free Hybritech managers to concentrate more on their business and less on raising capital needed to develop and market products, Hybritech President David F. Hale said.
"Ted (Greene) had been spending about 75% of his time on finding capital and I'd been spending about 25% of my time on capital arrangements," said Hale.