The merger and acquisition bug has hit Utah's technology community hard during the past few weeks, culminating Thursday in a blockbuster "merger of equals" involving NPS Pharmaceuticals (Nasdaq: NPSP).
Utah's brightest star of late in the biotech constellation, NPS has nearly a dozen drugs in various stages of development.
Preos, its drug targeting the $1 billion osteoporosis marketplace, is in the final stages of a Phase III clinical study that is expected to wrap up this fall, with clearance from the Federal Drug Administration anticipated by the end of 2004.
With more than $150 million in the bank at the end of the most recent quarter ended Dec. 31 and a growing product pipeline, NPS was on the verge of becoming a breakout pharmaceutical company and Utah's first fully integrated firm — but no more.
Now NPS is merging with Bridgewater, N.J.-based Enzon Pharmaceuticals (Nasdaq: ENZN) in a stock-for-stock transaction originally valued at $1.6 billion.
Enzon is a biopharmaceutical company with several products already cleared by the FDA and being marketed in the United States and beyond. The company generated more than $100 million in revenues during 2002 and had nearly $120 million in cash on hand at the end of the year.
Although the announcement was greeted with strong negative reaction on the NPS side of the equation, as the value of NPS's stock fell more than $6 per share the day the merger was unveiled, I personally believe this will be a good transaction for shareholders in both firms — for a variety of reasons.
On the one hand, the combined entity will have close to $250 million in the bank, generate more than $100 million in revenues this year, and have a robust pipeline of products at various phases of development, some of which address very large market opportunities.
That said, I am not convinced, however, that this is a good thing for Utah.
For example, the chief executive officer of the as yet to-be-renamed firm will be Arthur Higgins, Enzon's chairman, president and CEO, and not Dr. Hunter Jackson, NPS's head guy (although Jackson will be the executive chairman of the new firm).
Additionally, the new entity will have its headquarters in New Jersey and not in Utah, although the companies expect they will "maintain" a facility in Salt Lake City.
In other words, when Preos and other new drugs are brought to market, new deals are struck, or the stock reaches new highs, the focus will be on a New Jersey-based company and not on Utah.
Call me parochial, but that stinks for the state and its still-emerging biotech sector.
Then again, I believe it is a good deal for the shareholders. I guess we'll have better idea in the coming weeks and months ahead.
On a different but similar note, three other Utah firms were acquired (or are in the process of being acquired) in the past few weeks, each by an out of state firm.
Specifically, Huntington Beach, Calif.-based Avalon Digital Marketing Systems (Nasdaq: AVLN) acquired Draper-based MindWire, a growing Web development firm, in a stock-for-stock transaction.
In addition, Draper-based FutureSmart Networks, a venture capital backed company with smart wiring solutions for residential and commercial developers, was acquired recently by Grapevine, Texas-based LifeStyle Innovations (OTC BB: LFSI).
The final acquisition has not yet been formally announced yet but involves another Salt Lake City-based, VC-backed company that has been quite successful over the years but got to the point recently where the best option for its shareholders was to sell the firm to an out-of-state company.
With the exception of FutureSmart, each of these firms will cease to exist as their own entities with their respective brand identities, each of which has been inextricably tied to Utah.
Any future buzz in the marketplace about these firms and their individual products/services will be tied to the acquiring companies and their respective states and hometowns and not to Utah.
On the one hand, it's too bad that none of these firms will have its headquarters in Utah any more, as each (in its own way) had developed unique technologies and services.
On the flip side, four more teams of Utah-based executives and employees that have gained additional experience in running tech companies in the state, three of which were venture capital backed, which will be a positive on the next go-round should any of them catch the entrepreneurial bug once again.
David Politis leads Politis Communications, a public relations, investor relations and marketing communications agency serving the high-tech and biotech markets.