Coming off a preliminary settlement with the U.S. government for alleged misbranding that would take about $40 million from its coffers, Aegerion Pharmaceuticals Inc. agreed to a merger with QLT Inc. that gives the combined company a pair of marketed products plus phase III-ready QLT091001 (Zuretinol), awarded ultra-orphan fast track status by the FDA for inherited retinal diseases (IRDs).

The deal is part of "an aggressive strategy to transform our company back into a high-performing rare disease company," Aegerion CEO Mary Szela said. "Over the past five months, we have executed against this strategy efficiently and effectively and we've begun to stabilize our business," and the arrangement with QLT provides a "fresh start," she told investors during a conference call.

Cambridge, Mass.-based Aegerion's stock (NASDAQ:AEGR) closed Wednesday at $1.71, up 38 cents, or 28.6 percent on the news, and QLT, of Vancouver, British Columbia, (NASDAQ:QLTI) ended at $1.50, up 7 cents, as Wall Street hailed a deal in which Leerink analyst Joseph Schwartz found "a lot to like."

Expected to close in the third quarter of this year, the deal swaps each outstanding share of Aegerion stock for 1.0256 shares of QLT to form a company called Novelion Therapeutics Inc., with Szela taking the helm of the combined outfit. Novelion will go forward with a cash balance of more than $100 million and trade on the Nasdaq Global Select Market as well as the Toronto Stock Exchange. An investor syndicate of new backers plus existing shareholders of both companies is chipping $22 million in to QLT, the shareholders of which (including the investors) will own about 67 percent of Novelion when the transaction is complete, with current Aegerion shareholders owning the remainder.

Under the deal terms, Aegerion and QLT have entered a loan agreement under which QLT has agreed to loan Aegerion up to $15 million for working capital. Aegerion has borrowed $3 million in connection with execution of the merger, and may pull down up to $3 million per month if necessary to maintain an unrestricted cash balance of $25 million, Aegerion's chief financial officer (CFO), Greg Perry, said.

The firm's two commercialized products are Juxtapid (lomitapide) capsules for homozygous familial hypercholesterolemia and Myalept (metreleptin) for complications related to leptin deficiency as well as congenital or acquired generalized lipodystrophy. In a February round of belt-tightening, the firm said goodbye to 25 percent of its global work force, leaving about 230 employees on staff.

Zuretinol is being developed to treat IRDs caused by mutations in RPE65 or LRAT genes (Leber congenital amaurosis [LCA] and retinitis pigmentosa [RP], both of which cause rapid vision loss and have no approved treatments). Phase III trials are expected to start with the oral synthetic retinol in the third quarter of this year, and QLT's interim CEO Geoffrey Cox said the safety profile has proven solid in trials thus far. Zuretinol could "achieve significant improvement in visual function and acuity as an alternative to gene therapy" in IRDs, he said. "Several key industry leaders highlighted that its oral dosing would, if approved, differentiate it as a potential therapy, particularly for patients who may not be amenable to more invasive options, such as younger children, due to intraocular surgical difficulties in underdeveloped eyes," he said. Other companies with efforts in LCA and RP include Spark Therapeutics Inc., Applied Genetic Technologies Corp. and Editas Medicine Inc. (See BioWorld Today, May 5, 2015.)

MORE THAN THE SUM OF ITS PARTS

Novelion also will pursue regulatory approval in Japan for Juxtapid and regulatory filings in Europe for Myalept. Aegerion picked up orphan drug Myalept by way of an agreement with London-based Astrazeneca plc for $325 million up front, with no milestones or royalties attached. Developed by San Diego-based Amylin Pharmaceuticals Inc., the product was a late-stage candidate during Amylin's $7 billion purchase by Bristol-Myers Squibb Co., of New York, which included an intricate side deal with Astrazeneca. It was subsequently approved by the FDA, though the agency slapped it with a risk evaluation and mitigation strategy (REMS), and the requirement to conduct seven postmarketing studies. (See BioWorld Today, Nov. 7, 2014.)

Last month, Aegerion said it reached preliminary agreements with the Department of Justice and the SEC regarding their ongoing investigations into the company's sales activities and disclosures with Juxtapid. If the agreement is ratified, the company would make payments totaling about $40 million, payable over five years, and would plead guilty to two misdemeanor misbranding violations of the Food, Drug and Cosmetic Act. One count would be based on the company's alleged marketing of Juxtapid with inadequate directions for use, and the second count involves an alleged failure to comply with a requirement of the Juxtapid REMS program. Separately, a five-year deferred prosecution agreement relates to charges that the firm violated the Health Insurance Portability and Accountability Act and engaged in obstruction of justice relating to the REMS program.

CFO Perry said that if the government cases are not permanently settled prior to closing the merger, "in order to mitigate the risk of certain losses from these outstanding matters after the transaction close[s]," QLT will issue warrants to QLT shareholders and the investors that would be exercisable for more Novelion shares to cover shortfalls should "investigations [be] subsequently resolved for amounts in excess of negotiated thresholds."

Novelion looks ahead to the potential for $300 million to $350 million in peak global sales from Juxtapid and Myalept as well as $200 million-plus from Zuretinol, if it's approved, CEO Szela said.

Leerink's Schwartz noted in a research report that "QLT introduced Aegerion investors [during the conference call] to some of its recent clinical trial results showing that about 80 percent of IRD patients treated with Zuretinol were classified as responders in at least one eye and that, in a particular case study, its drug demonstrated one to two months of durability of treatment effect, which is encouraging. Novelion is well-positioned to be stronger than the sum of Aegerion's and QLT's parts."

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