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Biotech firm Genex agrees to stock buyout


The troubled drama of Genex Corp. neared an end yesterday as the financially strapped Gaithersburg biotechnology firm said that it had agreed to be acquired by a New Jersey firm in an all-stock deal worth about 6.4 cents a share.

Genex went public in 1982 at a price of $12 a share. It closed yesterday at 6.25 cents a share.

Enzon Inc. of South Plainfield, N.J., said it will exchange 0.0065 of its shares for each share of Genex common stock and throw in warrants allowing Genex holders to buy Enzon shares for $18 each at any time within the next three years.

Since Enzon stock closed yesterday at $9.875 a share, the warrants aren't worth anything right now, said Donna Chappina, a spokeswoman for Enzon. Instead, they give the Genex shareholders a way to cash in on Enzon's success if Genex's new parent company is able to grow.

Reed Prior, president and CEO of Genex, said in a statement that the company, which is in the business of trying to make genetically engineered pharmaceuticals from proteins, was a victim of the capital squeeze that hurt the biotechnology industry last year.

The merger "exemplifies a growing trend whereby cash-poor biotechnology companies with strong technologies are being acquired by stronger companies looking for complementary technologies and capabilities," Mr. Prior said.

Genex has been staggering ever since the breakup of its relationship with G. D. Searle & Co., then the maker of the artificial sweetener NutraSweet. Genex spent $18 million to buy and equip a factory to make an ingredient used in NutraSweet, only to have Searle decide to start making the ingredient itself. Genex lost the Searle business in 1985. Diana Hopkins, a Genex spokeswoman, said the company hasn't been profitable since.

In February, Genex announced that it had retained investment bankers to try to find a buyer for the company.

Ms. Chappina said that Enzon wants to retain most of Genex's 29 remaining employees and plans to keep them in Maryland. She said details of who will oversee the Maryland operations have not been resolved. The acquisition is expected to be made final in September and is subject to the approval of Genex shareholders.

Ms. Chappina said that Enzon's key product is a drug delivery technology that uses polyethylene glycol to head off the body's normal instinct to reject foreign proteins.

The proteins can be the basis for valuable drugs, including some that are under development at Genex, Ms. Chappina said. But without drug delivery technologies that disguise their presence in the body, the body's immune system will attack the proteins before the protein-based drugs can do any good.

The deal will be a good strategic fit for Enzon because it will give the New Jersey company access to Genex's protein-based drug development program.

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