This update includes details throughout.
NEW YORK, Nov. 11 - Hyseq will buy Variagenics for approximately $55.9 million in stock--or roughly the amount of cash and equivalents held by the struggling SNP company, the two firms announced today.
The deal, which appears to ignore Variagenics' SNP and haplotype platforms, seeks chiefly to push Hyseq's drug candidates and extend the lifespan of the combined company for at least two more years, the firms said.
"The combined entity will take steps to help ensure that cash resulting from the merger will fund its operations through approximately December 2004," the companies said.
As a result, the new company, which does not yet have a name, will employ between 110 and 120 individuals. Before the acquisition announcement, Hyseq employed approximately 120 people after laying off roughly 20 percent of its staff in July 2001, according to a company spokeswoman. The number does not include the staff at Callida Genomics, Hyseq's gene-sequencing subsidiary.
Variagenics, meantime, has laid off 40 staffers so far this year, bringing its head count to 80, according to the Hyseq spokeswoman. The headcount target of between 110 and 120 therefore means that management will likely lay off between roughly 80 and 90 people.
The spokeswoman, Nicole Estrin, said all programs from both companies will be reviewed by an integration team. "We're not really committed to anything at this point," she said, adding that all R&D programs "will be held to very strict milestones." Estrin said the committee should make its decision over the next few weeks.
The new company will be headquartered in Sunnyvale, Calif.--Hyseq's current base--and will maintain a molecular diagnostics unit in Cambridge, Mass., the firms said. Callida will remain a privately held, separately funded, majority-owned subsidiary of the new company.
Hyseq Chairman George Rathmann will become chair of the new firm, which will appoint three executives from Variagencs and Hyseq to sit on the board. Hyseq President and CEO Ted Love will become president and CEO of the new firm. Both companies expect the deal to close by February 2003, they said.
"We entered into this transaction in order to accelerate the development of the most promising products of both companies," Rathmann said in the statement. Specifically, short-term goals will seek to leverage Variagenics' SNP database and cash position with Hyseq's own product-development initiatives. These include developing a thrombolytic agent, currently in Phase I trials, and creating a "cancer diagnostic program."
The acquisition comes at a dark time for many SNP shops. Beside's Hyseq's dismal bank balance--it said it had roughly $4.3 million cash as of Sept. 30, roughly its quarterly burn rate--a severely depressed market and white-hot competition forced Orchid Bioscience to put its SNP-tools business up for sale; and Xanthon, a six-year-old company developing a novel technology for gene-expression analysis SNP detection, closed its doors in September after failing to secure additional venture capital.
Other SNP-based tool and data companies appear to buck this trend. One of these firms, Sequenom, hopes to have its systems business profitable by the fourth quarter next year.