Biotech Firms InVitro, Miragen Plan to Combine

IRVINE — Reporting the latest in a 12-year string of losses, toxic-testing specialist InVitro International said Thursday it plans to merge with an allied private company, Miragen Inc., which will wind up owning 80% of the new company.

InVitro also announced Thursday that the Nasdaq Small Cap Market will no longer list its stock because its assets have fallen below $2 million. The stock, which closed unchanged Thursday at 18.75 cents, will trade over the counter.

InVitro’s loss for its second quarter, which ended March 31, totaled $395,000, or 2 cents a share, down from a loss of $467,000, or 4 cents, in the same period last year.

But with sales of its tests continuing to slip, and disappointing results on a child-safety package it has been marketing to new mothers, the company’s quarterly revenue fell from $260,000 to $164,000, a 37% decline.

The emerging publicly traded firm, based in Irvine like both its parent companies, will be named Miragen, but will use the InVitro name on InVitro testing products, which are sold to cosmetic and consumer goods manufacturers and transportation companies.

Founded in 1985, InVitro is a favorite of animal lovers. Instead of using live rabbits to test for toxins, its kits have protein compounds that mimic the human body’s reaction to chemicals. Analysts initially saw a big market for the tests, but they never caught on, in part because the Food and Drug Administration declines to take a stance on whether they are a good replacement for animal tests.

Experts said InVitro’s problems are typical of small technology-driven companies. A logical next step would also be a common one for biotech start-ups: a merger with a larger medical products company, they said.

“They have some neat products with potentially blockbuster business prospects, but they’re going to have to secure a bigger distribution deal,” said David Anast, publisher of the Biomedical Marketing Newsletter in Costa Mesa.

For now, though, the emphasis will be on trying to turn a profit on Miragen and InVitro’s products.

The child-safety package that InVitro has been promoting through coupons distributed in maternity wards was devised by Miragen. Included are an abduction-prevention video and a vial in which a saliva swab containing an infant’s DNA can be mailed to Miragen for safekeeping. It can be used for identification purposes if an unidentified toddler turns up.

Miragen’s other products include a blood antibody test that can match a mother’s “biological bar code” to her infant’s. The system recently identified an abducted South Carolina baby who turned up in a hospital restroom, said Miragen’s president, Kevin Morton.

Morton said Miragen, founded three years ago, will benefit from the merger by getting to use InVitro’s experienced sales staff for its products, which it is just starting to market. Miragen is currently raising millions of dollars through private placements of new stocks and bonds. That capital will help cash-strapped InVitro continue to market its products, President Richard Ulmer said.

Morton will be president and chief executive of the new company. It’s not yet clear if Ulmer will stay on.

InVitro in March said it was discussing a merger with Shenyang International of the British Virgin Islands, which wanted access to the U.S. stock market. Ulmer said the Miragen merger, expected to be completed in 120 days, is a better fit.

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InVitro-Miragen Merger

InVitro International, which recently lost its Nasdaq Small Cap market listing, is attempting to bolster itself by joining forces with Miragen Inc. Details on the two firms and InVitro’s delisting:

InVitro International

Headquarters: Irvine

President/CEO: W. Richard Ulmer

Products: Laboratory tests for toxic materials; distributor of Guardian DNA, a child-identification system supplied by Miragen Inc.

Employees: 15

Went public: 1991

Sales (millions)

1992: $1.4

1993: 1.9

1994: 1.7

1995: 1.1

1996: 1.1

Net loss (millions)

1992: $-5.1

1993: -3.7

1994: -4.4

1995: -2.8

1996: -1.9

*

Miragen Inc.

Headquarters: Irvine

Founded: 1993

President: Kevin Morton

Products: Biological identification and testing products

Employees: 12, including six independent sales representatives

Status: Private

Falling Short

InVitro International qualified for the Nasdaq Small Cap market in 1993 but its assets and stock price recently fell short of the market’s criteria to stay on the list. How InVitro measures against the Nasdaq’s Small Cap continued listing requirements:

Requirement: InVitro / International

1. Total assets: $2 million / $1.6 million

2. Stockholders equity: $1 million / $1.6 million

3. Publicly traded shares: 100,000 / 14.03 million

4. Market capitalization*: $200,000 / $2.7 million

5. Minimum stock price: $1.00 / 19 cents**

6. Market makers***: 2 / 13

7. Shareholders: 300 / Not available

* Value of publicly traded shares

** Thursday close

*** Firms on trading floor providing liquidity and putting capital behind a company’s stock by buying and selling it at guaranteed prices

Source: Nasdaq, Bloomberg News; Researched by JANICE L. JONES/Los Angeles Times