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Nova-Scios merger plans raise hope, concern Impact on future of local biotech industry questioned.


The pending acquisition of Baltimore's Pharmaceutical Co. by a California-based biotechnology company has raised concern among some business leaders, while bolstering optimism among others.

The home-grown drug company is seen as a cornerstone of the fledgling biotechnology industry in the Baltimore region, which is trying to attract enough companies to make it a nationally recognized center.

"I don't think it is the death knell for biotech in the state," said Walter A. Plosilla, who heads the Suburban Maryland Technology Council. "But this was the anchor pharmaceutical company in the city. It has to be cause for concern."

Mayo A. Shattuck III, president of Alex. Brown & Sons, a Baltimore investment banking company, said he hopes the merged company would continue to expand its Baltimore operations and perhaps provide more jobs and manufacturing.

"Nova is one of our shining stars here," he said. "In a lot of ways, this is a confirmation that we have an important scientific base."

The corporate headquarters of the new company, to be called Scios-Nova Inc., will be in Mountain View, Calif., but a research and development center with strong ties to Johns Hopkins University will remain in Baltimore, the companies said yesterday.

Whether any of Nova's 330 employees will lose their jobs remains unclear, as do many of the details of what the two companies say is a merger of equals.

But Hans Mueller, Nova's president and chief executive and a leader in the efforts to reshape the city's economic base, said he will stay in Baltimore as vice chairman of Scios-Nova Inc.

Nova was one of the city's earliest biotechnology companies, springing to life in 1982 from the laboratories of a Nobel Prize-winning scientist, Dr. Solomon H. Snyder, a neuroscientist at Hopkins.

Like dozens of other biotechnology companies, Nova promised blockbuster new medicines to treat illnesses such as schizophrenia, rheumatoid arthritis and septic shock. But the company appears to be years away from turning the fruits of Dr. Snyder's laboratories into marketable products.

Despite the lack of commercial success, however, investors have been glad to pour money into the dream. The company has $43 million in cash.

Officials of both companies consider the merger a marriage of convenience. Nova is strong in developing synthetic drugs using more traditional research approaches and needs additional money to finance long-term projects.

Scios Inc., formerly called California Biotechnology Inc., has that money -- $122 million in cash -- and an approach to drug development that uses the traditional biotechnology tools, including molecular biology.

Dr. Mueller and Scios Chief Executive Richard L. Casey have known each other for years, but the merger was put together in the past eight weeks, after Dr. Mueller called Mr. Casey, both men said yesterday.

The work of the two companies could fit well together, said Merrill Lynch analyst Maureen McGann. Scios, with 187 employees, is working on wound-healing products that could fit into Nova's focus on inflammatory disease.

The merger, she said, was a cheap way for Scios to beef up its portfolio.

The stock transaction, valued at $180 million, awaits approval of the shareholders of both companies at a special meeting in August.

Nova stockholders would exchange each of their Nova shares for 0.39 shares of Scios, whose shareholders would end up owning 60 percent of the new company.

John W. Culligan, chairman of the board of directors of Scios, and Mr. Casey, who is also president of Scios, will maintain those positions in Scios-Nova. Dr. Snyder will be on the new board.

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