Critical Therapeutics Signs Definitive Agreement to Merge with Cornerstone BioPharma
Transaction to Create a Respiratory-Focused Specialty Pharmaceuticals Company with a Diversified Commercial and Clinical Product Pipeline
Joint Conference Call to be held on May 2, 2008 at 9:00 a.m. EDT
LEXINGTON, Mass. and CARY, N.C. - May 1, 2008 â€“ Critical Therapeutics, Inc. (NASDAQ: CRTX) and Cornerstone BioPharma Holdings, Inc., a privately-held company, today announced the signing of a definitive merger agreement. Cornerstone is a specialty pharmaceutical company focused on developing and commercializing prescription medications for respiratory disorders. The stock-for-stock transaction is targeted to close in the fourth quarter of 2008.
â€œThe merger between Critical Therapeutics and Cornerstone creates a specialty pharmaceutical company focused on respiratory diseases,â€ said Trevor Phillips, Ph.D., president and chief executive officer of Critical Therapeutics. â€œIt brings together Cornerstoneâ€™s suite of products marketed to respiratory specialists with Critical Therapeuticsâ€™ ZYFLO CRTM (zileuton) extended-release tablets for the treatment of asthma. After reviewing alternatives during a strategic review process over the past six months, we believe that the product synergies created by a merger with Cornerstone offer the best opportunity to drive stockholder value.â€
Craig Collard, Cornerstoneâ€™s president and chief executive officer, said, â€œWe believe this transaction will allow both companies to maximize the value of our marketed products and better exploit our commercial resources. We believe that the critical mass we aim to achieve as a specialty pharmaceutical company can enhance significantly our standing in the market.â€
The principal commercial assets of the combined company will comprise a number of marketed products including the following:
Â· ZYFLO CRTM: FDA-approved ZYFLO CRâ„¢ (zileuton) extended-release tablets, a leukotriene synthesis inhibitor for the prophylaxis and chronic treatment of asthma in adults and children 12 years of age and older. ZYFLO CR is not indicated for use in the reversal of bronchospasm in acute asthma attacks;
Â· SpectracefÂ®: FDA-approved SpectracefÂ® (cefditoren pivoxil), a third-generation cephalosporin for the treatment of pathogens commonly associated with respiratory diseases in adults and adolescents 12 years of age and older; and
Â· AlleRxÂ®: AlleRxÂ® Dose Pack family of products used for the temporary relief of symptoms associated with allergic rhinitis.
Product Development Plans
The combined companyâ€™s clinical and preclinical pipeline will include a number of product candidates. The combined company will implement a strategic review of its product development pipeline and is expected to pursue line extensions of SpectracefÂ® as part of the life cycle plan for that product with any new products targeted for launch during the two years following the closing of the transaction. Following the strategic review, the combined company may seek to maximize the value of any non-core programs throughout-licensing, divestiture or spin-off transactions.
Details of the Proposed Transaction
The merger will take the form of a stock-for-stock merger intended to qualify as a tax-free reorganization. Under the terms of the agreement, all outstanding shares of Cornerstoneâ€™s common stock will be converted into and exchanged for shares of Critical Therapeuticsâ€™ common stock and all outstanding Cornerstone options and warrants will be assumed by Critical Therapeutics and become options and warrants to acquire Critical Therapeuticsâ€™ common stock. The merger agreement provides for Critical Therapeutics to issue in the merger to Cornerstone stockholders, and assume Cornerstone options and warrants that will represent, an aggregate of 101.5 million shares of Critical Therapeuticsâ€™ common stock, subject to adjustment as a result of a reverse stock split to occur in connection with the closing of the merger. Following the transaction, Cornerstoneâ€™s stockholders will own approximately 70 percent, and Critical Therapeuticsâ€™ stockholders will own approximately 30 percent, of the combined companyâ€™s common stock, after giving effect to shares issuable pursuant to outstanding Cornerstone options and warrants, but without giving effect to any shares issuable pursuant to outstanding Critical Therapeutics options and warrants.
The merger agreement has been approved by the Boards of Directors of both companies and requires approval by the stockholders of Cornerstone. In addition, Critical Therapeuticsâ€™ stockholders are required to approve the issuance of Critical Therapeuticsâ€™ stock to Cornerstoneâ€™s stockholders in the merger. In connection with the execution of the definitive agreement, Healthcare Ventures and Advanced Technology Ventures, who together hold approximately 19 percent of the issued and outstanding common stock of Critical
Therapeutics, have entered into agreements whereby they have agreed to vote their shares in favor of the merger. In addition, holders of a majority of the shares of Cornerstoneâ€™s issued and outstanding common stock have entered into agreements whereby they have agreed to vote their Cornerstone shares in favor of the merger and refrain from selling any of the Critical Therapeutics shares they receive in the merger for six months following the closing of the transaction.
In addition to approval by Critical Therapeuticsâ€™ and Cornerstoneâ€™s stockholders, the closing of the merger is subject to other customary closing conditions as detailed in the merger agreement. Critical Therapeutics expects to file a Form S-4 and related proxy statement/prospectus with the U.S. Securities and Exchange Commission. Depending on the timing of filing and effectiveness of the Form S-4, the companies currently target the closing of the merger in the fourth quarter of 2008. In connection with the transaction, Critical Therapeutics intends to apply for re-listing of the combined companyâ€™s shares on NASDAQ to trade under the symbol â€œCRTX.â€ Critical Therapeutics plans to institute a reverse stock split, subject to stockholder approval, to comply with NASDAQâ€™s minimum bid price requirement at the time of the merger.
Lazard is acting as exclusive financial advisor and Wilmer Cutler Pickering Hale and Dorr LLP is acting as legal counsel to Critical Therapeutics. Jefferies & Company, Inc. is acting as exclusive financial advisor and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. is acting as legal counsel to Cornerstone.
Executive Management and Organization
Following the closing of the transaction, Craig Collard, president and chief executive officer of Cornerstone, will be president and chief executive officer of the combined company. Brian Dickson, M.D., chief medical officer of Cornerstone, will be the chief medical officer of the combined company. Steven Lutz, executive vice president, commercial operations of Cornerstone, will be executive vice president, manufacturing and trade of the combined company. George Esgro, vice president, sales and marketing of Cornerstone, will be vice president, sales and marketing of the combined company.
Following the closing of the transaction, the combined companyâ€™s Board of Directors is expected to consist of five directors, including two current Cornerstone directors and three independent directors. The Chairman of the Board of the combined company is expected to be Alastair McEwan, who is presently the Chairman of Cornerstoneâ€™s Board.
The combined company will be named Cornerstone Therapeutics Inc. and will be headquartered at Cornerstoneâ€™s offices in Cary, North Carolina.
Conference Call Information
Critical Therapeutics and Cornerstone will host a joint conference call to discuss the proposed merger and the combined business and strategic overview of the merged companies. Interested parties may access the conference call by way of webcast or telephone.