Purdue Pharma

Base Ten Prognosis

Biotech Acquisitions

Chrysalis and DNX

Corrections or additions?

Life in the Fast Lane

These articles by Barbara Fox and Melinda Sherwood were published in U.S. 1 Newspaper on May 12, 1999. All rights

reserved.

In January, H. Joseph Reiser promised that Cytogen

Corp. would emerge from red ink in March. Reiser, CEO of the struggling

biotech only since September, made good on his promise. The biotech

firm has posted its first profitable quarter in 18 years.

For the three months ending March 31, net profits were $1.7 million,

compared to a net loss of $4.3 million in the first quarter of last

year. Earnings per share were three cents compared with last year’s

net loss of eight cents. This quarter marks the first time the company

has made a profit in its 17-year history.

In planning its makeover, Cytogen’s board consulted with a turnaround

expert but left the specifics to Reiser, who replaced founder Thomas

McKearn as president and CEO last September. "When I came to Cytogen

the board had decided to reinvent the company. It was a challenging

undertaking to say the least," says Reiser.

The son of a scientist, Reiser was born in Bad Kissingen, Germany,

but was raised in midwestern United States. He went to Indiana University

(Class of 1970), where he earned his PhD in physiology, and spent

his career at Berlex Laboratories, the Wayne-based subsidiary of Schering

AG.

"In repositioning the company, we needed to have some consistent

income from products and some streamlining of operations. My charge

was to bring a management orientation to this," says Reiser.

Cytogen had sold the nearly 20,000 square foot laboratory at 201 College

Road East, built in 1992 to prepare shipments of its first two OncoScint

products. Connecticut-based Purdue Biopharma LP purchased the lab

for $4 million and has agreed to manufacture Cytogen products on a

contract basis while retaining 90 percent of Cytogen’s workers (see

story below). Cytogen realized $3.7 million from that sale. Another

chunk of this quarter’s cash, $1.6 million, represents part of the

$4 million private stock offering — 6 million shares of common

stock sold to such major investors as the State of Wisconsin. Adding

to the profit margin was a reduction of $4.5 million in operating

expenses.

Another of Reiser’s successful moves has been to enlist the Berlex

sales force to market one of Cytogen’s three major products, Quadramet.

Used for managing cancer bone pain, Quadramet is one of three of Cytogen’s

nuclear medicine-based diagnostics.

Reiser’s connections at his former company helped, he

admits, "but quite honestly I do believe that Berlex was the right

choice. They have an evolving franchise in oncology with only one

product on the market," says Reiser. A company with a limited

product line, he believes, will take each new product more seriously.

"They were committed to it — the original agreement was for

about 50 representatives and now they have 120 or so."

After stabilizing Cytogen and showing that it is moving forward, his

next big challenge is to grow the company by strategically focusing

on prostate disease. He realigned the sales force for the prostate

cancer imaging product, ProstaScint; developed an interactive Internet-based

training program for its use; and made plans to develop a new technology

(Prostate Specific Membrane Antigen or PSMA). His long-range goal

is to leverage relationships with urologists to add new products and

services.

Sales of products for the quarter did not contribute much to the net

profits; they were $2 million, including a slight increase in sales

showed by ProstaScint (for prostate cancer) and a slight decrease

for OncoScint (for ovarian cancer). Quadramet sales figures are misleading

because 1998 figures include a one-time influx of $1.6 million from

royalties from a now-defunct sales partnership.

In the cash pipeline is $4 million that could come from the new state

program for selling tax losses and R&D credits. Buyers are lined up

to purchase these credits, Reiser says, but the state is still working

on refining the legislation.

Does Cytogen have a For Sale sign on the lawn at 600 College Road?

"You never know," says Reiser, "but our goal is not to

be sold at this point, our goal is to stabilize and grow. If someone

becomes interested in us in the future, we will look at that."

Cytogen Corporation (CYTO), 600 College Road East,

CN 5308, Princeton 08543-5308. H. Joseph Reiser, president and CEO.

609-987-8200; fax, 609-452-2975. Home page: http://www.cytogen.com.

— Barbara Fox

Top Of Page
Purdue Pharma

Purdue Biopharma L.P., a research-oriented biopharmaceutical

company seeking to benefit patients by providing treatment for cancer,

infectious diseases, and disorders of the immune system, has just

moved in to the laboratory formerly occupied by Cytogen at 201 College

Road East. It is manufacturing Cytogen’s products on a contract basis.

The company is owned by Purdue Pharma L.P., headquartered in Norwalk,

Connecticut, which handles research and development, as well as marketing,

sales, distribution, and licensing for prescription drugs, over the

counter medicines, and hospital products. The Norwalk headquarters

will provide human resources, communications, and upper management

for the New Jersey-based lab, says Bob Broeze, vice president of biologics

research at Purdue Biopharma and also the former vice president of

operations for Cytogen.

Purdue bought the property for $4 million from Cytogen. Broeze says

that Purdue opened the office because of the high concentration of

pharmaceuticals in the area and instant access to a lab. "It was

an excellent match for what the company needed," says Broeze.

Purdue Biopharma is also acquiring most of the Cytogen employees.

"In the next six months or so about 20 to 30 Cytogen employees

will transit over to Purdue," says Broeze. By the end of the year

he expects to have a team of 80, and he is still looking for individuals

with experience in molecular biology, pharmaceutical development,

and protein purification.

Purdue Biopharma LP, 201 College Road East, Princeton

08540. Robert Broeze, vice president of biologics research. 609-987-8240.

Top Of Page
Base Ten Prognosis

The flak hit the fan, but the dust has settled, and

the outcome of Base Ten’s shareholder meeting at company headquarters

on Friday, May 18, at 4 p.m. is a foregone conclusion. In the face

of a stockholder revolt, two officers of the company and two board

members have resigned, but Thomas E. Gardner, the 51-year-old president,

has kept his job, at least for now.

Trading as BASEA, the 32-year-old company at 1 Electronics Drive Ten

had made its name doing weapons control systems and custom electronic

systems for data handling. After the fall of the Berlin Wall in 1989

it lost its major client, the Federal Republic of Germany, and in

1991 Mike Kranzler, the CEO, began to broaden the companies focus

to manufacturing execution systems and services for the international

pharmaceutical and medical devices industries.

No one from the company returned calls by press time, but what happened

over the past two years can be gleaned from a report to shareholders

issued May 3 and other documents. In 1997 Base Ten reported $15.5

million in losses, more than double the losses for 1996. In May of

1997, a Fort Worth-based investor, Jesse L. Upchurch, put up $3 million

to develop a medical imaging technology. (Upchurch is an heir by marriage

to the Tandy fortune and has a travel business in Fort Worth.) Board

member Alexander M. Adelson of the RTS Research Lab was hired to devise

marketing strategies for medical technology businesses.

In November, 1997, Thomas E. Gardner came on board as president and

CEO. A native of Toledo, where his family had a wholesale toy business,

Gardner went to the University of St. Thomas, Class of ’70, and had

worked for Proctor & Gamble, J&J, Simon & Schuster, and Dun & Bradstreet.

Gardner brought on William F. Hackett as senior vice president and

CFO, and the company floated a $19 million private placement. Already

well underway was a spin-off — an employee buyout — of the

defense equipment side of its business, to be known as Strategic Technology

Systems. Base Ten was to continue developing manufacturing execution

systems. Perhaps as a result of the spinoff, the stock dropped from

$10 to $6.

But by September, 1998, William Sword (a board member

who heads the Chambers Street-based investment banking firm) had an

$80,000 three-month contract to look for someone to buy one of the

company’s medical imaging technologies, a way of archiving ultrasound

images to track ovarian cancer. The search did not, apparently, bear

fruit.

The stock continued to fall until it went below $2. In November, 1998,

Upchurch bought up a mammoth amount of the stock, perhaps to protect

his earlier investment. The stock rose to around $3, and Upchurch’s

ownership went from 13.3 percent of the voting power to 42.3 percent.

He and two cohorts in the Upchurch Group — Drew Sycoff and Kevin

R. Lockhart — now own 13.5 million shares and control 59.4 percent

of the stock.

In any case, these dissident stockholders objected to the way the

company was being managed, and in March they called for Gardner’s

resignation. Both Richard Bagshaw, executive vice president, and Stephen

A. Cloughley, marketing vice president, resigned at the end of April,

but Gardner is still in place.

The Upchurch Group nominated two directors to replace Sword and another

well-known Princeton investment expert, Carl W. Schafer, former financial

vice president of Princeton University. Current board members who

will remain include another Princeton-based executive, 72-year-old

Alan S. Poole, formerly international vice president of Johnson &

Johnson Pharmaceutical in Belgium, and David C. Batten, 53, formerly

a general partner with Lazard Freres and a managing director of First

Boston Corporation.

The Upchurch nominees are John C. Rhineberger and Robert Hurwitz.

Each has extensive retail experience. Rhineberger had headed Color

Tile, Sherwin Williams Floor World, and most recently worked for Home

Depot and Shaw Industries. Hurwitz was chairman and co-founder of

Office Max Inc. but his chain of home furnishing stores, HomePlace

Stores, went into Chapter 11 bankruptcy reorganization last year.

"Tom Gardner did a superb job of getting the company out of debt

and restructuring the preferred stock," says Kranzler, Gardner’s

predecessor, who now has a consulting business, Bootstrap Partners,

at the Straube Center. "That Upchurch provided additional funds

happened during Tom’s watch, and he gets kudos for that."

Base Ten Systems Inc., 1 Electronics Drive, Box

3151, Trenton 08619-3151. Thomas Gardner, president, CEO, co-chairman.

609-586-7010; fax, 609-586-1593.

— Barbara Fox

Top Of Page
Biotech Acquisitions

Interactive Clinical Technologies Inc., 20 Nassau

Street, Suites 10 and 233, Princeton 08542. Daniel J. Scanlon, president.

609-430-1011; fax, 609-430-1245.

Galen Holdings PLC, the UK-based integrated pharmaceutical company

with services in both Europe and the United States, has purchased

Interactive Clinical Technologies Inc. (ICTI) at 20 Nassau Street.

"This acquisition gives us access to more clients and a sister

company with complementary services," says Daniel J. Scanlon,

CEO of ICTI. "In addition to offering everything from turnkey

programs to highly tailored services, we can now offer an even broader

scope of international capabilities and services, making ICTI a one-stop

resource for the pharmaceutical and biotech industry."

ICTI is expecting to move into its 15,000 square foot facility currently

under construction in Lambertville by August. ICTI will continue to

operate under its own name as a wholly owned subsidiary of Galen.

Scanlon founded the company with Scott McCarty in 1995. "We have

grown very very quickly," says Scanlon. "We are a small, strong

company, and aligning ourselves to Galen will allow us to grow more

quickly." Scanlon has a background in business information systems

from the College of New Jersey and worked for a pharmaceutical company

for seven years before founding ICTI. McCarty has a degree in pharmacy

from Philadelphia College of Pharmacy.

Galen provides packaging and distribution services to 18 of the world’s

top 20 pharmaceutical companies, says Scanlon. ICTI provides centralized

patient randomization, data collection, and drug management services

for clinical trials in the pharmaceutical industry. "We share

the same philosophy, a commitment to quality and superior customer

service," says Scanlon. "Galen recognized our long term value

and has something to give back to us."

"Princeton has a lot of good talent and is a great location for

growing businesses," says Scanlon. ICTI presently has around 25

employees in Princeton and three employees at its facility in San

Francisco. "There is a great need for talent," says Scanlon.

— Melinda Sherwood

Top Of Page
Chrysalis and DNX

Chrysalis (DNX Transgenic Sciences) (CRLS), 301B

College Road East, Princeton Forrestal Center, Princeton 08540. Mark

E. Swanson, vice president transgenic sciences. 609-520-0300; fax,

609-520-9864.

The acquisition of Chrysalis International, the DNX Transgenics group,

by Montreal-based Phoenix International was completed Friday, April

30. "DNX is very pleased to be joining the Phoenix organization,"

says Mark Swanson, vice president. "We are attracted by Phoenix’s

science-driven management and innovative position in the CRO industry.

As a result of our acquisition by Phoenix, and the opening later this

year of a new facility in Princeton that will triple our capacity,

we believe we are well positioned to provide expanded transgenic animal

technologies and target-selection services to assist current and new

clients in their rapidly growing genomics efforts."

Phoenix’s new facility will be at Cedar Brook Corporate Center at

Exit 8A. Chrysalis has closed down its corporate headquarters in Raritan.

Phoenix International is a contract research organization providing

a wide spectrum of clinical, analytical, preclinical, drug discovery

support, and ancillary services to the pharmaceutical and biotechnology

industries.

— Teena Chandy

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