60% of Genetics Institute Is Sold to Drug Maker

CAMBRIDGE, Mass. — Genetics Institute Inc., a pharmaceutical company starved for capital, agreed Thursday to sell 60% of itself to American Home Products Corp. for $666 million.

Genetics Institute said it will continue as an independent, publicly traded company, but two American Home Products representatives will sit on its expanded eight-member board.

Like other biotechnology companies, Genetics Institute has endured a string of losses while waiting for its products to receive regulatory approval and be sold to the public.

The firm was dealt a blow last spring when a federal appeals court in Washington threw out its patent for the anemia-fighting drug erythropoietin, or EPO. The March 6 decision left a competitor, Amgen Inc., with exclusive rights to produce the drug. That sent Genetics’ stock plunging.

Ten-year-old Genetics Institute, which uses genetic engineering to make pharmaceuticals, expects to report its first profitable quarter for the three-month period that ends Aug. 31.

“For Genetics Institute going forward, they clearly needed to raise more capital,” said David K. Stone, an analyst with Cowen & Co. in Boston.

American Home Products, based in New York, is a worldwide manufacturer and marketer of prescription drugs and medical supplies.

Under the agreement, which must be approved by Genetics Institute shareholders, American Home Products will pay $50 a share for 40% of the outstanding common stock of Genetics Institute.

American Home Products will also buy about 9.5 million newly issued shares of common for $300 million.

Genetics Institute stock closed at $37.875 Thursday, down 12.5 cents.

Chairman John R. Stafford said American Home Products’ stake should help it become a leading biotechnology company, with new products ready for market beginning in the mid-1990s.

Genetics Institute already has one product on the market in Japan and Europe. It stimulates red blood cells for severely anemic patients.