TAKING STOCK

SYNERGEN INC. NEVER SUCCEEDED IN MAKING ANYTHING--EXCEPT ITS FORMER EXECUTIVES VERY RICH.

Imagine that you have a good idea, perhaps even a great idea, for a product that might help humanity--and, of course, make some money along the way. So you start your company and a few years later raise hundreds of millions of dollars by selling stock to the public.

Years go by, and the value of your stock swells and deflates depending on news of your progress. Then one disastrous day, your idea goes up in smoke. Maybe it wasn't ever workable, maybe the timing was off, maybe you got something a little wrong. For whatever reason, you never actually produce a widget; you never make a sale.

In most businesses, what happens next is simple: You go broke. After all, no product, no profit.

Unless you worked in the brave new world of biotechnology. Then you could walk away a millionaire. It happened in Boulder.

Late last year, after nearly fifteen years in business, Synergen Inc. ceased to exist. The value of its publicly traded stock had plummeted following the failure of a medication the company hoped would combat deadly infections. In November, Synergen's directors voted to sell to Amgen Inc., the largest biotech company in the world.

Despite Synergen's spectacular disintegration, its executives emerged unscathed. Here's how:

Well-timed stock sales: Many top executives had the foresight to sell large blocks of stock when Synergen was trading at its peak, making them instant millionaires.

Repriced stock options: In August 1994, just after the company laid off 60 percent of its workforce, Synergen's board of directors voted to lower the purchase price of stock options available to company employees. This controversial courtesy--which the board had granted its executives on other occasions--was not extended to public stockholders, who simply lost money when Synergen's stock dropped. But it was particularly helpful to the company's executives, who held tens of thousands of stock options from their salary packages and bonuses.

A golden parachute: Thanks to some last-minute maneuvering in the company's final months--including new contracts written just weeks before it was sold to Amgen--Synergen's top officers left with a severance package that started with three years' salary. For the company's top-paid executive, CEO Greg Abbott, that provision alone called for a goodbye check worth three quarters of a million dollars.

Synergen Associates was founded in January 1981 by four University of Colorado scientists, who planned to research and develop various genetic-engineering techniques. According to state records, the company was incorporated as Synergen Inc. in 1983.

Biotechnology--the business of cloning the body's own proteins and then using them to fight diseases--is not for the faint of heart. It is a long, bumpy and ultimately uncertain road from a good idea to a product. It can take hundreds of millions of dollars and more than a decade of lab work just to lay the necessary groundwork.

Which is why Synergen didn't really begin to take off until relatively recently. In its early years, Synergen teamed up with other biotech companies to do basic research and completed some small projects for commercial ventures, including Coors. Along the way, two of the original founders, Larry Gold and Marvin Caruthers, departed to pursue other research. A third, David Hirsh, left the company's day-to-day operations several years ago; today he teaches at Columbia University. Larry Soll stayed.

In 1990 Synergen launched human trials for its most promising product, a drug called Antril. The company touted Antril as a treatment for sepsis, a deadly spread of bacteria resulting from infection. Sepsis affects a half-million people every year in this country alone; nearly half of them die from it. Though tragic in human terms, such large numbers are encouraging news to investors and optimistic biotech companies.

Sepsis is an enormously complex condition, and several recent attempts to develop drugs to treat it all ended in failure. This is hardly unusual; industry analysts estimate that only one fifth of the proposed products that make it to human clinical trials eventually get approved by the Food and Drug Administration.

But in the business of biotechnology, a company need never produce anything in order for people to buy in. Because of the simple potential to earn huge profits, investors are willing to pour hundreds of millions of dollars into research that is odds-on to fail.

That's what happened with Synergen and Antril. Given the large potential market and Antril's promising early results, Synergen quickly became a hot property. By the end of 1990 its stock was selling at $17.25--a 263 percent gain in value over two years.

In 1991 the company raised more money, funds necessary to shepherd Antril through the clinical-testing and government-regulation processes. The public offering was successful, and Synergen soon had a $300 million bank account built on the promise of Antril.

That same year, the company moved the drug into Phase II clinical trials. While Phase I trials are meant to show a drug is safe, Phase II tests aim to prove it has some sort of positive effect on patients. (Phase III tests, the final stage before FDA approval, are designed to confirm Phase II results with more patients.)

By the end of 1991 Synergen's stock was burning up Wall Street. Shares closed the year selling at $68.50, four times their price just a year before. The heady environment was enough to make executives cocky. When one analyst criticized the company, according to an anecdote quoted in Business Week, co-founder and chairman Larry Soll mailed him a tin of Shinola shoe polish and a pile of plastic dog shit. An accompanying note suggested the analyst couldn't tell the difference.

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