Ethyl Corp. Offers to Buy Nelson Research of Irvine

Nelson Research & Development Co., an Irvine drug developer that has yet to cash in on its extensive research, said Friday that it had received an unsolicited $45-million takeover bid from Ethyl Corp., a Richmond, Va., chemical and petroleum products maker.

The company also said that founder Eric L. Nelson, who left the helm of the 13-year-old company early this year, already has sold his 14% stake to Ethyl for $5 per share, the same price Ethyl is offering for the remaining 8 million shares.

The news was released a few minutes after the markets closed Friday. Nelson shares ended the day at $3.25, down 12.5 cents. In the past year, the shares have sold for as high as $8.50 and as low as $2.88.

A spokesman for Ethyl, which currently has no biomedical operations, said the company would not comment on its reasons for making the acquisition bid. Nelson officials said only that the offer would be considered at a directors’ meeting Thursday and that they had retained Merrill Lynch Capital Markets to act as the company’s financial adviser.

Larry Selwitz, an analyst with Bateman Eichler, Hill Richards Inc. in Los Angeles, said the takeover bid perhaps represents one of the brightest prospects on the horizon for Nelson shareholders who have waited for the company’s operations to take off and generate profits. In the last seven quarters, the company has lost a total of $4.2 million.

“There’s been a lot of optimism at the company, but it never seems to get translated to the bottom line,” Selwitz said. “The company doesn’t seem to be going anywhere.”

Nelson Research attracted a lot of attention several years ago with the development of Azone, a patented product that makes the skin more porous and allows topically applied drugs to penetrate the skin more quickly. Last year the company also announced that it was undertaking a “major research program” on how to deliver drugs to the brain more efficiently.

Selwitz said Ethyl, whose 1985 revenue topped $1.5 million and whose profits last year were $117 million, has been funding drug-related research at several companies in recent years. He speculated that Ethyl might have concluded that it was time to make a direct investment in the field and selected Nelson Research as the vehicle.