Cytogen buyout offer accepted by CytoRad to end dispute

August 15, 1994

Firms feuded over R&D funding of MoAbsMonoclonal antibody developer Cytogen has reached an agreementwith sister company CytoRad to settle their dispute over fundingof the development of imaging and therapy agents. The proposedtransaction calls

Firms feuded over R&D funding of MoAbs

Monoclonal antibody developer Cytogen has reached an agreementwith sister company CytoRad to settle their dispute over fundingof the development of imaging and therapy agents. The proposedtransaction calls for Cytogen to buy out CytoRad in an exchangeof stock and warrants.

The rift between the firms surfaced earlier this year, whenCytoRad announced that it was considering changes to its businessrelationship with Cytogen (SCAN 6/29/94 and 4/20/94). CytoRadwas formed as a sister company to fund development of Cytogen'sprostate and bladder cancer products, as well as an ovarian cancerradiotherapy product. CytoRad licenses rights to the productsin exchange for milestone payments. Both firms are based in Princeton,NJ.

CytoRad charged that Cytogen did not supply sufficient dataabout products it was licensing to CytoRad, in violation of theagreement between the firms. Cytogen accused its sister companyof failing to commit sufficient funds for product development.

Cytogen proposed to settle the dispute in May by buying outCytoRad in a stock swap, but the offer was rebuffed. Cytogen lastmonth apparently sweetened the proposal, which CytoRad said itwould accept pending stockholder approval.

According to the agreement, Cytogen would acquire CytoRad byexchanging each share of CytoRad stock for 1.5 units of Cytogenstock. Cytogen would also give CytoRad stockholders warrants tobuy one share of Cytogen stock at $8 a share for each CytoRadshare outstanding, with the offer expiring Jan. 31, 1997. CytoRadstockholders would also win the right to receive up to half ofan additional share of Cytogen stock for each CytoRad share ifthe warrants have no value at the time of the expiration date.The agreement requires approval from shareholders of both companies.

Cytogen last month also reported financial results for thesecond quarter (end-June). Revenues slumped significantly: Cytogenrecorded revenues of $320,000 for the quarter compared to $2.4million for the same period a year ago. The drop was due to CytoRad'scutoff of license and contract payments, Cytogen said. CytoRadpaid Cytogen $1.6 million in the second quarter of 1993 for productdevelopment. The net loss for the quarter was $6.4 million, comparedto a $6.5 million loss for the same period a year ago.

Product revenues from OncoScint CR/OV, Cytogen's monoclonalantibody agent for the detection of colorectal and ovarian cancer,rose $100,000 over the first quarter of 1994, with Cytogen recording$317,000 in the second quarter of 1994 compared to $215,000 inthe previous quarter. Sales of OncoScint remain unchanged relativeto the first quarter of 1994, but Cytogen recorded more revenuedue to a $105,000 charge in the first quarter for expired products.

Cytogen plans to relaunch OncoScint CR/OV once it receivesFood and Drug Administration clearance for repeat use of the agent.Cytogen currently has FDA approval only for single-dose administrationsof OncoScint.