CombinatoRx and Canada's Neuromed have agreed to merge in an all-stock deal that starts out with a 50-50 split of the combined company followed by a recalibration of ownership based on the FDA's decision--and timing--regarding Neuromed's pain drug Exalgo. CombinatoRx will issue 36 million shares of common stock to complete the deal.
Investors in both companies will be left waiting to hear how the agency rules on Exalgo, a late-stage pain drug recently licensed to a subsidiary of Covidien for $15 million upfront, $16 million for development funding and up to $40 million for an approval. The FDA has a November 22 PDUFA date on the drug, and there's a lot riding on the agency's timetable. Pre-merger CombinatoRx shareholders will gain a greater ownership percentage of the combined company the longer it takes to gain an approval.
"This is a unique merger structure, with a contingent valuation element providing downside protection and upside participation for shareholders," said Robert Forrester, interim president and CEO of CombinatoRx. "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."
- check out the press release