Xenova has become the latest company to ride the wave of consolidation sweeping the UK biotechnology industry by offering to buy KS Biomedix in an all-share offer valuing the latter firm at around £8.5 million (€11.9m).
The news comes just two weeks after KS Bio revealed that it was in merger talks, adding to the list of deals in the UK which this year has seen British Biotech hook up with Vernalis and Celltech acquire Oxford Glycosciences, while the USA's Chiron snapped up PowderJect.
The merger would create a company with a strong focus on oncology and 12 drugs in clinical trials, although the company said that a re-prioritisation would occur to focus on those compounds with the most promise.
The two companies also both have contract manufacturing operations. KS Bio's Canadian subsidiary KS Avicenna offers contract biopharmaceutical manufacturing, while Xenova was recently been awarded a two-year contract by Sweden's Pharmexa for the manufacture of a vaccine in clinical trials as a treatment for breast cancer and other tumours.
One strategic option under review is the disposal of one of the combined entities' two manufacturing sites, whilst retaining long-term manufacturing supply contracts with the acquirer of the site "in order to maintain the supply of clinical material for the enlarged group's own clinical trials," according to Xenova.
Commenting on the offer, David Oxlade, Xenova's chief executive, said: "our objective is to build a profitable, oncology focused UK biotechnology company, with a sufficiently broad portfolio to manage risk for investors and provide medium term returns to shareholders through successful drug development."
The companies said that additional funding would be required in order to advance KS Bio's TransMID treatment for glioma, a form of brain cancer, and that it would be approaching the markets for cash once the merger offer has become unconditional.
Xenova suffered a late-stage disappointment when its drug to overcome multidrug resistance in cancer, tariquidar, failed at the Phase III trial stage, but the company has not yet given up on the project. Along with TransMID, tariquidar is still marked as a priority in the combined pipeline, as are TA-CD for cocaine addiction (Phase II), KSB303 for cancer, XR11576 and XR5944 for solid tumours and TA-NIC for nicotine addiction.
The companies said the merger affords significant opportunities for synergies and cost savings "by rationalising and consolidating the development functions, operational sites and central support costs of the two groups and by selling off or closing non-core operations." Annualised cost-savings of £10 million are achievable, it said, at a one-off cost of £2.7 million.
Xenova already has experience in absorbing another company, having acquired Cantab in 2001.Meanwhile, the unaudited interim results of Xenova for the six months to 30 June were announced today. These show that for the six months Xenova incurred a loss on ordinary activities before taxation and R&D tax credits of £8.1 million, up from £5.5 million in 2002, and as at that date had net assets of £19.4 million and cash, short-term deposits and investments of £10.1 million.
Meanwhile, KS Bio's audited results for the half show that the company incurred a loss on ordinary activities before taxation and R&D tax credits of £33.9 million, up from £15.3 million in 2002, and had net assets of £16.1 million and cash and liquid investments of £7.4 million.