Ailing Irvine Biomed Firm Agrees to Sell
CoCensys Inc., a struggling Irvine biomedical company, has agreed to be acquired by pharmaceutical firm Purdue Pharma LP for $8.5 million in cash, the companies said Friday.
Norwalk, Conn.-based Purdue Pharma, with estimated worldwide revenue of $1.2 billion, will purchase all outstanding CoCensys stock for $1.16 per share, a 32% premium over Thursday’s closing price.
In addition, Purdue will assume $1 million in debt.
CoCensys stock, which is traded over the counter, closed Friday at $1, up 13 cents a share.
The sale is expected to be completed by September. The boards of both companies have approved the transaction.
CoCensys will remain in Irvine, although it will lose its name after the acquisition.
The company’s 31 scientists and scientific managers will keep their jobs, but the future of its seven executives and administrative assistants has yet to be determined, said F. Richard Nichol, CoCensys’ president and chief executive.
“We did the best we could for our shareholders and employees,” he said. “We were in a very precarious financial position that was unacceptable for the future of the business. In other words, we were running out of cash.”
The 10-year-old company, which develops products for the treatment of brain and nervous system disorders, has been beset by a plethora of problems in recent years.
In July, the stock was removed from the Nasdaq market because its price had consistently fallen below the minimum listing price of $1 a share.
Since April, the company has slashed its work force by 57%, or 51 employees.
In 1998, tests on humans showed that Ganaxolone was ineffective in relieving pain for acute-migraine sufferers, leading CoCensys stock to plummet.
A year earlier, the company had to sell its sales and marketing division to Corona-based Watson Pharmaceuticals Inc. for $9 million.
The company has spent more than $177 million developing drugs but so far has yet to turn a profit. It has no products on the market.
Last year, CoCensys reported a $15.2-million loss on revenue of $2.6 million. Its stock has lost more than 91% of its value in the last 12 months.
In light of those difficulties, CoCensys hired investment banker Hambrecht & Quist to help it raise money.
Given Wall Street’s lack of interest, a sale seemed like the best course of action, Nichol said.
Michael Friedman, group vice president for Purdue Pharma, said CoCensys’ research complemented Purdue Pharma’s.
CoCensys’ problems notwithstanding, the company should have fetched a higher price, said Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley.
“To sell it for less than $10 million is ridiculous,” he said.
