By Mary Welch
Ilex Oncology Inc. acquired Convergence Pharmaceuticals Inc., a privately held company that focuses on angiogenesis and DNA repair inhibitors, and closed on a $20 million private placement.
Boston-based Convergence will receive about $10 million worth of Ilex common stock, which comes out to about 1 million shares, and up to an additional 1 million shares if two compounds reach the clinical stage. Ilex also retired $1 million worth of Convergence's debt.
At the same time Ilex completed a private placement of 2.4 million shares that raised $20 million, a per-share price of about $8.37. The stock (NASDAQ:ILXO) closed Monday at $9.906, down 3.1 cents per share. Ilex now has 16.4 million shares outstanding.
Ilex, of San Antonio, said proceeds will be used to improve its cash position, continue clinical development of its pipeline and "take the company to profitability." Participants in the financing included Alta Partners LP, of San Francisco; Advent International, of Boston; Chase Capital Partners, of New York; and McCombs Enterprises, of San Antonio.
Convergence officials said the fit with Ilex made the merger of technologies most attractive.
"We had a number of offers and we had venture capital-type financing in place," said Glenn Rice, president and CEO of Convergence. "We had higher offers but this was not just a numbers game.
"The question we looked at was, 'What is going to allow us to be a leader in our field?' Ilex has a strong focus on oncology and tremendous experience in [small molecules and therapeutics]. They really are an amazing small-cap story."
For its part, Ilex wasn't looking for a company with drugs in the preclinical stage, let alone one with a more-developed pipeline.
Ilex Attracted To Angiogenesis Research
"We weren't looking to acquire anything, really," said Richard Love, Ilex's president and CEO. "And, we've never really been interested in early-stage companies. We've always looked for ways to add value to our pipeline. But the technology was presented and after we looked at it, we realized this could give us a lead position in angiogenesis."
Convergence had other selling points as well, Love said. "They had formidable intellectual property. A lot of large pharmaceutical companies were looking at them as were a number of other companies. Bringing Convergence on board actually helped us with our investors because they saw the value in Convergence's technology."
Convergence focuses on the treatment of oncogenic diseases through the development of therapeutics in the target areas of angiogenesis inhibition and DNA repair inhibition. It has six anti-angiogenic proteins and certain collagen XVIII derivatives that have shown anti-cancer activity in preclinical testing.
Angiogenesis inhibitors act to hinder new blood-vessel formation. Convergence has identified and licensed out several unique classes of novel, extracellular, matrix-derived angiogenic inhibitors. The company said the inhibitors seem to be specific for endothelial cells and block the response to a variety of angiogenic growth factors.
"Our problem with this area is that we have so many promising inhibitors that we can't decide which one should be our lead," said Rice, who now is vice president of research at Ilex and a director. "But we expect to have one in the clinic within a year, which is what one of our milestones is based on."
As part of the deal, Ilex also obtained NM-3, an orally active small molecule anti-angiogenic drug from the Microbial Chemistry Research Foundation in Tokyo; a commercial manufacturing supply agreement with Tokyo-based Mercian Ltd.; and licensed technology involving certain DNA repair targets and lead molecule candidates from ARCH Development of Chicago.
"We have really good drug-development skills and expertise and we will take over Convergence's drug-development programs right away," Love said. "Half of our business is doing drug-development work, like a CRO [contract research organization], and we'll be doing that with Convergence's compounds."
While Convergence's work is still in the preclinical stage - but heading toward Phase I - Ilex has several late-stage products. Campath, which Ilex is developing with LeukoSite Inc., of Cambridge, Mass., finished pivotal Phase II trials. A biologics license application is in the final stages of preparation and should be ready by the end of the year. Since it received accelerated approval status from the FDA, Campath could be available by mid-2000, Love said.
Campath is a humanized monoclonal antibody being developed for patients with B-cell chronic lymphocytic leukemia refractory to fludarabine. Fludarabine, marketed by Schering AG, of Berlin, is the only approved treatment for patients who have failed to respond to alkylating agents, the standard front-line therapy. (See BioWorld Today, June 15, 1999, p. 1.)
In addition to Campath, Ilex has DFMO (eflornithine) in Phase III trials in patients with superficial bladder cancer. Interim results are expected in 2001 and 2002, with the full trial to be completed in 2003. (See BioWorld Today, Feb. 24, 1999, p. 1.)
Ilex also is planning a registration-directed trial of oxypurinol in patients with symptomatic hyperuricemia who are intolerant to allopurinal. About 400 patients are expected to participate.
The company also has two Phase II trials under way - aminopterin in patients with persistent, recurrent or refractory endometrial carcinoma, and ILX295501 in non-small cell lung cancer, renal cancer, melanoma, and ovarian cancer.
Two compounds, SR-45023A and ILX23-7553, are in Phase I advanced metastatic cancer studies.