BioWhittaker, Inc., a Frederick County biotechnology company, said yesterday it has struck a deal to acquire a California cell culture firm for $12.2 million in an effort to position itself as a strong player in the emerging human cell culture supply business.
Stock analysts and investors responded favorably yesterday to BioWhittaker's announcement that it would acquire privately held Clonetics Corp. of San Diego, considered a pioneer in the human cell culture business.
"We like the deal very much. This is a very positive move" for Biowhittaker, said Donald H. Newman, an analyst with Ladenburg, Thalman & Co., a New York investment house that tracks the Walkersville company.
BioWhittaker saw its stock price improve yesterday on trading of more than 29,000 shares. It closed at $7.625 per share, up 50 cents.
The company had net earnings of $4.7 million, or 43 cents per share, on sales of $55 million in its fiscal year ending Oct. 31, 1995.
One reason the acquisition looks attractive, said Mr. Newman, is that, although Clonetics is a small company in a still emerging field of biotechnology, it earned a strong profit in 1994.
The company reported earnings of $700,000 on sales of $4.8 million for that period. Clonetics said sales for the current year are expected to be $5.4 million.
Analysts said the acquisition should position BioWhittaker as a player in the emerging human cell culture trade. Some biotech industry experts believe the field holds the potential for big sales should certain advancements be made to ensure human cell cultures respond in the laboratory to drug, or toxicology, testing.
Human cells are sold to pharmaceutical, government and academic research laboratories. They might have important clinical applications should their use in screening out the effects of new medicine on the human body be further developed.
Clonetics, founded in 1984, has developed a key technology which prods some human cells to retain their characteristics, such as the job they do for the body, once they are removed from the body for growing cultures.
One of the big sticking points in using human cells for drug testing and other scientific research has been that human cells don't retain their characteristics once removed for culturing. "Clonetics has a reputation as a leader in this field," said Philip L. Rohrer Jr., chief financial officer of BioWhittaker. "This fits just perfectly with the cell line we have now, and it should generate growth for us in the cell culture business."
He said BioWhittaker is looking into other acquisitions that might strengthen the company's new focus on the emerging human cell culture business.
The company supplies more than 1,500 products to the health care and biotechnology markets. The company's primary products are tissue cell culture and endotoxin detection products.
Earlier this week, BioWhittaker sold off its diagnostic test kit business to Wampole Laboratories for about $12 million. About 50 BioWhittaker employees will lose their jobs as a result of that sale.
BioWhittaker had been in talks with Clonetics for about nine months on a possible acquisition, but wanted to complete the sale of its test kit division first so that the Clonetics deal would not entail taking on any debt, said Mr. Rohrer.
Under the agreement, BioWhittaker will pay Clonetics shareholders $8.8 million and will assume about $3.3 million in expenses, most of them associated with closing and moving the San Diego operation.
If the deal is approved by Clonetics' shareholders and the Securities and Exchange Commission, the San Diego operations will be moved to BioWhittaker's headquarters in Walkersville. Mr. Newman, the analyst, said he thought it a prudent and efficient move to consolidate operations to Walkersville.
Clonetics employs about 50 people, though not all of them will be offered jobs during the transition. Mr. Rohrer said Clonetics' key management and technical employees would be offered posts with BioWhittaker.
The acquisition should create new hiring opportunities at
FTC BioWhittaker, said Mr. Rohrer.
Mr. Rohrer said the Clonetics acquisition probably wouldn't have a positive effect on BioWhittaker's earnings until 1997, since BioWhittaker will incur costs associated with keeping the San Diego operations open for about six months while employees, equipment and science is transferred.