Arris Pharmaceutical to acquire Sequana Therapeutics for 9.7 times revenue

Weekly Corporate Growth Report, Nov 17, 1997

The Deal: Arris Pharmaceutical has agreed to acquire Sequana Therapeutics for stock valued at $166 million. Arris will issue 1.35 shares of its stock for each share of Sequana. The acquisition will be accounted for as a purchase and is expected to result in a substantial charge related to ``inprocess" technology. On the news, Sequana flew $2.6875, or 24%, to $13.9375/ share. Shares of Arris were down 87.5 cents, or 7.3%, at$11.125/share.

Discussion: According to Richard van den Broke, a biotechnology analyst with Hambrecht & Quist, the deal is unlike other recent biotech mergers, since both companies are relatively stable and have enough working capital to sustain themselves on their own for several more years.

While Arris is a drug-discovery company, Seq n's expertise is in finding new genes. The newly formed AxyS Pharmaceuticals, as the combined companies will be called, will have all of the necessary disciplines in house that are needed for developing new drugs. In addition, it will have $100 million in cash, which it expects to be working through at $25 million a year, and large research deals with a number of major pharmaceutical companies.

With over 320 researchers and nearly 400 total employees, AxyS will become one of the most highly enabled biotech companies in the industry. It will bring together for the first time advanced genomics techniques with state-of-the-art structure-based drug design, combinatorial chemistry, medicinal chemistry, and clinical development resources.

Sequana Therapeutics is a leading genomics company that uses industrial-scale gene finding technologies and functional genomics to develop products aimed at diagnosing and treating common human diseases.