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Wednesday, March 22, 2006
Last modified Tuesday, March 21, 2006 10:33 PM PST
Biotech company eyes merger
By BENNETT HALL
Gazette-Times business editor
Siga Technologies could become part of East Coast biodefense firm
A growing Corvallis biotech company has agreed to be absorbed by a larger East Coast firm, but local employees are expected to stay right where they are.
Siga Technologies, which is headquartered in New York City but employs about 40 people in its Corvallis labs, has signed a term sheet to merge with PharmAthene Inc. of Annapolis, Md. The combined company would operate under the PharmAthene name.
The agreement is not yet binding, with final terms still under negotiation and subject to approval by shareholders and regulators. The deal is expected to close in three to six months.
If the merger goes through, PharmAthene’s chief executive says, he intends to hold onto Siga’s Corvallis laboratories and skilled work force, which includes 16 Ph.D.s.
“We plan to keep them very busy,” said President and CEO David P. Wright. “We have no plans on moving the labs.”
He also plans to keep Oregon State University microbiology professor Dennis Hruby, Siga’s chief scientific officer and top local executive, on the payroll in a similar capacity after the merger.
While Siga brings considerable research talent to the deal, PharmAthene brings a wealth of marketing and commercialization experience from the corporate pharmaceutical world.
The two firms also bring a complementary array of drug development candidates, particularly in treatments for various biological warfare agents. The U.S. government has invested heavily in this sort of research since the 2001 terrorist attacks, and the companies’ shared biodefense focus is what makes the merger so attractive, according to Hruby.
“It’s a matter of getting a little more critical mass and momentum in the biodefense industry,” Hruby said.
In addition to making billions of dollars in research funding available through Operation BioShield, the federal government has relaxed approval standards for biodefense treatments, making it possible to bring a developmental compound to market more quickly than other kinds of drug candidates.
Successful compounds stand to reap rich procurement contracts as Washington stockpiles defenses against potential bioterror attacks.
Siga Technologies has a smallpox treatment in an advanced stage of development and plans to begin human safety trials soon at a National Institutes of Health lab in Bethesda, Md.
Even though smallpox was declared eradicated in the 1970s, samples were kept for research by the U.S. and Soviet governments. Today, some observers believe, supplies of the killer virus could be available to terrorists. None of the trial participants will be infected with smallpox, a Siga official said.
Siga is also working on treatments for hemorrhagic fevers, a class of lethal tropical viruses including Ebola and Marburg.
As with the smallpox drug, no live samples of the target disease are used. The company’s researchers handle only “surrogate organisms” — viruses that are related to but much less dangerous than the targeted strains, which can only be studied in secure, government-certified labs.
PharmAthene, which has about 70 employees in Maryland and at a research center in Canada, is developing treatments for anthrax and chemical nerve agents.
The two companies’ antiterrorist offerings dovetail nicely with the federal government’s biological warfare defense program, according to a PharmAthene spokeswoman.
“We bring together two very strong biodefense platforms,” said Stacey Jurchison. “Our portfolios would then target three of the top five priorities of Operation BioShield.”
The deal comes in the midst of a substantial growth spurt for Siga, which is putting the finishing touches on new laboratory space at its Sunset Research Park facility.
“We’re basically doubling our lab size from 3,500 to about 7,000 square feet,” said Hruby. “We’ve doubled our staff over the last two years.”
The tentative agreement is structured as a reverse merger, Jurchison said, with a private company — PharmAthene — gaining control of a public company — Siga.
As part of the deal, PharmAthene would give Siga a loan of up to $3 million. PharmAthene’s shareholders would receive shares of Siga common stock, while outstanding PharmAthene warrants and options would be converted into warrants and options for stock in the combined firm.
When all is said and done, PharmAthene’s shareholders — a handful of venture capital groups, including HealthCare Ventures, MPM Capital and Bear Stearns Innoventures — would own about 68 percent of the merged entity, with Siga shareholders owning a 32 percent stake.
The proportion of ownership would be reflected in the new company’s board of directors.
Siga’s shares were trading on the Nasdaq Tuesday at $1.07, giving the company a market capitalization of $28 million.
Bennett Hall is the business editor for the Gazette-Times. He can be reached at 758-9529 or bennett.hall@lee.net.
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