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Negative reactions pound stock of Univax, buyer

Wall Street continued to pound the shares of Univax Biologics Inc. and North American Biologicals Inc. yesterday, in a big negative reaction to the merger between Rockville-based Univax and the Florida firm that agreed Monday to acquire it.

Investors in North American were angry that a profitable company with a stable business agreed to take on Univax, a 7-year-old company whose first drug reached the market only this spring and which had been projected before the deal to keep losing money through 1997.

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North American's stock fell $1.375, to $9 a share yesterday, bringing the two-day loss in the stock to 21 percent. Stock in Univax, whose owners will receive 0.79 shares of North American for each Univax share, fell 75 cents, to $7.25, to reflect the lower value of North American's stock.

At yesterday's closing price, the deal would be worth $7.11 per Univax share instead of the $9 announced. Univax Chief Financial Officer Cabot Caskie did not directly answer a question about whether the falling value of the deal would lead Univax to push for a renegotiated price.

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"The deal is not contingent on movement of the stock price," he said. "Whether that is satisfactory will be decided by the shareholders when they vote."

Thirty-eight percent of Univax stock is held by officers and directors.

Defenders of the deal said it will pay off for both companies in the end, because Univax has more scientific and clinical know-how to add to North American's long-term growth, and because its key drug to treat a common AIDS complication is expected to yield $100 million or more in annual sales by 1999.

Univax also has a $71 million tax credit based on its losses since inception, Mr. Caskie said, and will get more revenue from a product development deal with Chiron Corp. that was also announced Monday.

The more numerous critics said Univax's short-term losses are so big (about $10 million in the first half of 1995) that they drag down the value of North American, which was projected to make about $12 million this year before the deal.

"It's a $150 million transaction for a $12 million company," said Virgil Cilli of Keane Securities in New York, using the $12 million analysts projected as Univax's 1995 sales. "I don't care what the product is."

NatWest Securities Corp. also criticized the deal, saying it would depress North American's earnings through 1999.

Dillon, Read & Co. analyst Michael King, one of the most bullish analysts following Univax, said the deal was a good one. "The shareholders of North American are [mad] about the dilution, which I think is shortsighted," he said. Without the merger, North American would have had to pay even steeper premiums to get access to new products to supplement its own pipeline of drugs under development, Mr. King said.

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North American Chief Financial Officer Alfred Fernandez said the combined company will be profitable in 1996, and that Univax's product lines should be profitable by late in the decade. As an independent company, analysts had said Univax would post a narrow loss in 1997 and turn profitable in 1998.

"Someone doesn't understand," Mr. Caskie insisted. "I don't think we can say whether the stock price is fair or unfair. It is what it is."


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