CombinatoRx and Neuromed Sign Merger Agreement
News Jul 06, 2009
CombinatoRx, Incorporated and Neuromed Pharmaceuticals, Inc. announced they have entered into a definitive merger agreement under which CombinatoRx and Neuromed will merge in an all-stock transaction.
Under the terms of the merger agreement, CombinatoRx is expected to issue approximately 36 million new shares of its common stock to Neuromed stockholders with each party owning approximately 50% of the voting power of the merged organization upon closing. Relative ownership of CombinatoRx will then be adjusted based upon the outcome of the FDA's review of the NDA product candidate, Exalgo™.
This merger brings together the product assets and financial resources of both organizations, including potential Exalgo™ milestones and royalty revenue and Neuromed's proven drug development expertise, with the CombinatoRx portfolio of product candidates and its drug discovery capabilities.
The rights to Exalgo™, designed to be a once-daily, oral hydromorphone treatment seeking FDA approval for chronic to severe pain, were recently acquired by Mallinckrodt Inc., a subsidiary of Covidien plc, for $15 million in upfront payments, additional development funding of up to $16 million to cover internal and external costs associated with Exalgo, an approval milestone of $30 million, which could potentially increase up to $40 million, and tiered royalties on Exalgo™ net sales after approval. Neuromed has filed a New Drug Application for Exalgo™ with the FDA, which has a November 22, 2009 PDUFA review date.
"By combining forces with Neuromed, we can create a sustainable biotechnology company that has significant product assets, unique discovery capabilities and substantial financial resources. In addition, Christopher Gallen and the rest of the Neuromed management team will bring their considerable product development expertise to bear on the CombinatoRx pipeline and discovery platform. Collectively, the Neuromed team have contributed significantly to more than 10 successful NDAs or other major regulatory submissions and they have launched over 10 pharmaceutical products" said Robert Forrester, Interim President and CEO of CombinatoRx.
"Further, this is a unique merger structure, with a contingent valuation element providing downside protection and upside participation for shareholders. This merger with Neuromed will leverage the operational efficiencies created by CombinatoRx's recent restructuring, including workforce reductions and divestiture of our Singapore subsidiary, to focus on our core technology, simplification of our balance sheet and reduced cash burn going forward. As a result, we expect to have sufficient cash to continue operations into 2012," concluded Forrester.
"Through this merger with CombinatoRx, we have the opportunity to build a biopharmaceutical organization with a novel approach to drug discovery and development," commented Christopher Gallen, MD, Ph.D., President and CEO of Neuromed.
"CombinatoRx's unique discovery approach and the multiple mid- and early-stage product candidates in the CombinatoRx pipeline, combined with Neuromed's clinical development experience, project management driven culture and ion channel inhibitor programs, will enable the potential creation of new therapeutics. The recent CombinatoRx-Novartis oncology collaboration further recognizes the potential of the CombinatoRx technology by combining the innovative discovery for which Novartis is well known with the systematic exploration of combination therapy made possible by the CombinatoRx platform."
Under the terms of the transaction agreements, CombinatoRx will issue shares of common stock to Neuromed stockholders with each party's pre-merger stockholders owning approximately 50% of the voting power of the merged organization upon closing. Based on the timing of the FDA's approval decision on Exalgo™, the percentage ownership will be adjusted by issuing shares out of escrow to former Neuromed holders or returning shares from escrow back to CombinatoRx.