Gensia Will Acquire Irvine Drug Developer
Gensia Pharmaceuticals has signed a definitive agreement to acquire Kendall McGaw Pharmaceuticals of Irvine for $15 million, the companies said Monday. Completion of the proposed deal is “contingent upon financing” being arranged, Gensia President David Hale said.
Gensia is developing drugs that acute-care hospitals will administer to victims of heart attacks and other illnesses to minimize the tissue damage that results from a lack of oxygen. Arasine, its initial product, should enter the European market in 1993 and the U.S. market by 1994, Hale said.
A division of Boston-based Kendall Co., Kendall McGaw Pharmaceuticals has about 90 employees and will report a net loss on anticipated revenue of $3 million this year, Hale said. The company manufactures small-volume injectable pharmaceuticals that are used by acute-care hospitals, Hale said. Kendall McGaw Pharmaceuticals has developed an anti-inflammatory agent, a muscle relaxer and an antibiotic drug.
On Monday, Kendall completed the sale of several other medical/biotech businesses to an investment group led by businessman James M. Sweeney. However, Sweeney’s group elected not to acquire the pharmaceuticals operation and Gensia moved quickly to acquire Kendall McGaw Pharmaceuticals, Hale said.
Gensia, which has 90 employees in San Diego, recently reported a $5.8-million net loss for the six-month period ended June 30, contrasted with a $4.7-million loss during the same period a year earlier. Gensia has not yet reported any revenue from product sales, Hale said.
Hale said that the acquisition would “significantly accelerate” Gensia’s entry into the acute-care hospital market because the Irvine-based company’s products are “compatible” with Gensia’s proposed product lines.
Both companies are aiming their products at doctors who are treating patients in critical-care hospitals, Hale said. Consequently, Gensia plans to build a “small” sales organization that would sell Kendall McGaw Pharmaceutical’s products and, later on, Gensia’s products, to acute-care hospitals.
The proposed acquisition would also give Gensia an FDA-approved plant that will be used to manufacture Gensia’s future line of products, Hale said. Gensia’s strategic plan called for the eventual construction of a manufacturing plant at a cost of about $25 million, Hale said.
Gensia will seek financing rather than use $40 million in cash that remains from its past private stock offerings and an initial public offering earlier this year, Hale said. Gensia, which has raised a total of $50 million in recent years, instead will use its cash to fund the development of proprietary drugs to treat cardiovascular and cerebrovascular diseases, Hale said.
Kendall McGaw Pharmaceuticals’ revenue stream is expected to pick up during the coming year as three new drugs enter the acute-care hospital market, Hale said. The company also has developed more than 30 drugs that are beginning to work their way through FDA review, Hale said. Kendall McGaw Pharmaceuticals generates revenue both through the sale of its own drugs and the manufacture of drugs for other companies, including Gensia, Hale said.
Gensia plans no layoffs at Kendall McGaw Pharmaceuticals, Hale said. “There is no overlap, really, in the structures of the two companies,” Hale said. Gensia’s headquarters will remain in San Diego and the combined companies eventually will share the Gensia name.
Gensia will use Kendell McGaw Pharmaceutical’s plant to produce Arasine and Arbutamine, two products that will soon enter Phase 3 clinical trials, Hale said.
Despite its losses, Gensia is in a “strong financial position to support its research and development programs,” Hale said. Gensia in February sold 15.9% of its stock to Marion Merrell Dow Inc. for $15 million in a deal that gave Marion Merrell Dow the right to exclusively license, manufacture and market certain drugs that Gensia is developing.
Gensia was founded in 1986 by two UC San Diego scientists. Before joining Gensia, Hale served as president of Hybritech when the San Diego-based monoclonal antibody company was acquired by Eli Lilly & Co. in 1986.
