Syntro Corp. Weighs Future, Considers Sale : Troubled Biotech Firm Grapples With Shortfall
Syntro Corp., a troubled San Diego biotechnology company that has experienced a sharp decline in revenue and losses totaling more than $14 million since its founding in 1981, said Wednesday that it may soon cease to exist as an independent company.
President Cam Garner said Syntro has retained Shearson Lehman Hutton investment bankers to help it pursue financial alternatives that would “enhance shareholder value.” Those alternatives include a possible sale of the company.
“We have come to the conclusion that the only way we can commercialize our technology is through a major joint venture or a sale of the company,” Garner said in an interview, adding that the objective in such a sale would be to realize “some increased value for shareholders.”
Syntro stock closed up $.125, at $1.625 a share in over-the-counter trading Wednesday. The stock has slumped steadily since its initial public stock offering in July, 1986, when shares sold for $8 each. Syntro reported a loss of $6.6 million on revenue of $1.6 million for fiscal 1988, contrasted with a loss of $4.1 million on revenue of $3.7 million for 1987.
Earlier this year, Syntro introduced its first commercial product, a pseudorabies vaccine for swine, and it is trying to develop several more genetically engineered animal vaccines and health-care products for humans.
More Time and Capital
But the products have taken far more time and capital to develop than the company anticipated, two former Syntro board members said Wednesday.
Sales of the swine vaccine in fiscal 1988 were $200,000--considerably less than the $1 million that former Syntro President Thomas Parmeter had projected in 1987 for first-year sales. On Wednesday, Garner said the shortfall was due to delays in getting a companion diagnostic product for pseudorabies on the market.
The company had also hoped by now to have a “multivalent” animal vaccine on the market, or one vaccine that protects farm animals from a variety of sicknesses. But the company thus far has been able to develop only the monovalent product for pseudorabies, said Richard Moser, president of R&D; Funding of Santa Clara. Moser sat on Syntro’s board until earlier this year.
Moser’s company is general partner of PruTech, a research and development partnership that has financed most of Syntro’s product research in exchange for rights to its technology, including the pseudorabies vaccine.
But the PruTech research funds, which have totaled more than $10 million over the years, dried up last year. Syntro is now deriving its revenue mainly from pseudorabies vaccine sales, interest income and a $500,000, two-year contract from the Department of Defense to develop a malaria vaccine.
Too Much at Once?
William McElroy, a former UC San Diego chancellor who quit the Syntro board last month, said the company’s problems perhaps stemmed from trying to develop “much too many things simultaneously.”
Earlier this year, Syntro announced plans to spin off its protein polymer technology into a new unit to be headed by former Syntro President Parmeter. The spinoff, to take effect Jan. 1 pending financing arrangements, will save the company about $1 million in overhead, Garner said. The new company, which will take seven Syntro employees with it, will try to develop a bioengineered fabric similar to silk.
Parmeter resigned from Syntro last June after disputes among board members as to the future direction of the company, sources said. Syntro laid off 10 employees earlier this year, but no more layoffs of its 42 current employees are planned, Garner said.
With shareholder equity at $12.6 million and 9.8 million shares outstanding on a fully diluted basis, Syntro had a book value of about $1.28 a share as of Sept. 30.
