This article has been updated from a previous version.
NEW YORK, June 13 - Celera Genomics announced its intention Wednesday to acquire Axys Pharmaceuticals in a stock transaction valued at $173.4 million, making good on its promise to purchase a company with chemistry and drug design capabilities.
In the stock-for-stock transaction, Celera will pay Axys shareholders the equivalent of $4.65 per Axys share, representing a 35 percent premium based on Axys' Tuesday closing price of $3.45 a share. Axys reported 37.3 million shares outstanding in its first quarter earnings.
Celera, of Rockville, Md., said it hopes to use Axys' chemical libraries of small molecules and its experience in structural and medicinal chemistry to identify potential drugs for protein targets that Celera identifies through its proteomics program.
"We believe Axys has the technical capabilities, infrastructure, and most importantly the people to take us forward," said Peter Chambre, Celera's chief operating officer, in a conference call to discuss the transaction.
As part of the new company, Axys' senior management will take positions within Celera, and Axys' team of 55 chemists and biologists will work together with Celera's scientific team. Michael Venuti, Axys' vice president for research and development, will report to Craig Venter, Celera's president, and Paul Hastings, Axys' CEO, will report to Chambre.
Chambre said that Celera would allow Axys, of South San Francisco, to continue in its current collaborations with Merck to develop lead drug compounds for osteoporosis, and with Aventis to identify lead compounds for inflammatory and autoimmune diseases.
In addition to its collaborations, Axys also has its own drug development efforts in oncology, but Venter made clear that Celera did not buy Axys for the drugs currently in its pipeline, but instead for its capabilities in biology and chemistry.
"We did not do this based on the pipeline that has existed or does exist," he said. "But we're not going to ignore it either."
Hastings added that Axys would try to find partners to further develop the drugs currently in its pipeline, and would focus primarily on finding drug candidates for Celera's targets.
Venter said that Celera has targeted four key disease areas in its drug discovery efforts, including colon, pancreas, lung, and breast cancer. He did not comment specifically on what diseases or classes of drug targets Axys' team of chemists would tackle initially.
Analysts were optimistic that the Axys acquisition would benefit Celera in the long run, and that the premium Celera paid was not excessive. "This is right on target for their strategy," said Winton Gibbons, an analyst with William Blair in Chicago. "Given [Axys'] capabilities, they got it for a good price."
Other analysts noted that the deal did not significantly dilute Celera's stock, while providing the company with an additional $29 million in cash from Axys' coffers to add to Celera's cash position of $1.1 billion. However, Axys is currently burning $50 million a year, according to report from James Reddoch, an analyst at Banc of America Securities in New York.
Part of that may be paying for a new 43,000 square foot medicinal chemistry facility Axys is building in South San Francisco that will house up to 80 chemists. In addition to its other capabilities, Axys CEO Hastings said that the company has access as a customer to the combinatorial chemistry libraries of its former subsidiary Axys Advanced Technologies, now a part of San Diego-based Discovery Partners.
Axys, however, won't solve all of Celera's needs, said Tony White, CEO of Applera, Celera's parent corporation. The company still needs to build or acquire capabilities in target validation, he said, "because we don't think we can achieve all that we need in this area."
Reddoch agreed, noting in a report that Celera "still needs to fill-in additional components of the gene-to-drug continuum."
"One of the first components that may need to be filled in is target validation, since Celera will be generating a high-volume of potential targets from its proteomics factory, and these potential targets need prioritizing," Reddoch said.