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InVitro and Miragen to Merge

Biotechnology: Deal comes after 12 years of losses for InVitro and would give Miragen 80% of the new company.


Reporting the latest in a 12-year string of losses, toxic-testing specialist InVitro International said Thursday that it plans to merge with an allied private company, Miragen Inc., which will wind up owning 80% of the new company.

InVitro also announced Thursday that the Nasdaq SmallCap Market will no longer list its stock because its assets have fallen below $2 million. The stock, which closed unchanged Thursday at 18.75 cents, will trade over the counter.

InVitro's loss for its fiscal second quarter ended March 31 was $395,000, or 2 cents a share, down from a loss of $467,000, or 4 cents, for the same period last year.

Sales of its tests have continued to slip, and those for the child-safety package it has been marketing to new mothers have been disappointing too. Revenue for the quarter fell from $260,000 to $164,000, a 37% decline.

The new entity will be publicly traded and based in Irvine, as InVitro and Miragen both are. It will use the InVitro name on InVitro testing products, which are sold to cosmetic and consumer goods manufacturers and transportation companies.

InVitro, founded in 1985, is a favorite of animal lovers. In its kits for testing toxins, protein compounds that mimic the human body's reaction to chemicals are used; there is no need to use live rabbits. Analysts initially saw a big market for the tests, but they never caught on, in part because the Food and Drug Administration will not take a stance on whether they are a good replacement for animal tests.

Experts said InVitro's problems are typical of those of small technology-driven companies. They said a logical next step would be a common one for biotech start-ups: a merger with a larger medical products company.

"They have some neat products with potentially blockbuster business prospects, but they're going to have to secure a bigger distribution deal," said David Anast, publisher of the Biomedical Marketing Newsletter in Costa Mesa.

For now, though, the emphasis will be on trying to turn a profit on Miragen and InVitro's products.

The child-safety package that InVitro has been promoting through coupons distributed in maternity wards was devised by Miragen. It includes an abduction-prevention video and a vial in which a saliva swab containing an infant's DNA can be mailed to Miragen for safekeeping. That can be used for identification purposes should an unidentified toddler turn up.

Miragen's other products include a blood antibody test that can match a mother's "biological bar code" to her infant's. The system was recently used to identify an abducted South Carolina baby who turned up in a hospital restroom, Miragen President Kevin Morton said.

Morton said Miragen, founded three years ago, will benefit from the merger because InVitro's experienced sales staff will be selling Miragen products, which it is just starting to market. Miragen is now raising millions of dollars through private placements of new stocks and bonds. That capital will help cash-strapped InVitro continue to market its products, President Richard Ulmer said.

Morton will be president and chief executive of the new company. It's not yet clear if Ulmer will stay on.

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