West Coast Editor

Corautus Genetics Inc.'s merger talks in the wake of a fizzled angina drug have yielded a definitive agreement to combine with VIA Pharmaceuticals Inc., which has two Phase II trials under way with its compound for vascular inflammation.

Shares of Corautus (NASDAQ:VEGF) had been recovering somewhat in recent weeks, as rumors circulated about the pending merger and closed Thursday at 48 cents, up a penny. The stock had crashed more than 68 percent April 10, ending the day at $1.07, when Corautus said the Phase IIb trial would be stopped due to lack of efficacy. (See BioWorld Today, April 11, 2006.)

In the merger, approved by the boards of both companies and expected to close in the second quarter, Atlanta-based Corautus will issue shares of Corautus common stock in exchange for their shares of VIA, after which VIA stockholders will own 76.4 percent of the combined company and Corautus stockholders will own 23.6 percent, upon delivery of $12 million of net cash at closing. VIA will apply to trade the new firm's stock on Nasdaq under the symbol "VIAP."

Officials from neither company could be reached Thursday.

Corautus' product was designed to bring about a short-term expression of the VEGF-2 protein, stimulating new blood vessels to grow by promoting the migration and proliferation of endothelial cells in the heart. In March, the firm voluntarily suspended the Phase IIb trial's enrollment to examine three serious adverse events of pericardial effusion, apparently not drug related. Worse news came the following month. (See BioWorld Today, March 15, 2006.)

Then, in October, Corautus said final efficacy results from the GENASIS trial did not achieve a statistically significant difference from placebo in any active dose group for the primary endpoint, an improvement of at least one minute in exercise tolerance time from baseline to three months. The data showed what the company described as "considerable" overlap in results between the active and placebo groups for the secondary endpoints as well, and no clear dose effect was seen. Corautus' stock took another 20 percent hit on the news.

Privately held VIA is testing the once-daily, oral VIA-2291, which inhibits an enzyme described as key in the biosynthesis of leukotrienes, in patients undergoing carotid endarterectomy (removal of a blocked artery) and patients at risk for recurrent cardiovascular events following acute coronary syndrome.

Corautus shareholders with about 34 percent of outstanding voting stock of Corautus, and Bay City Capital, of San Francisco, which holds about 89 percent of VIA's voting stock, have agreed to cast ballots in favor of the deal.

Lawrence Cohen, president and CEO of VIA, will hold the same positions in the combined company. James Stewart, VIA's chief financial officer, also will occupy the same job in the new firm, as will Oye Olukotun, VIA's chief medical officer.

The board of directors is expected to consist of seven directors, including three current directors of VIA, one of Corautus and three to be named by VIA before the merger closes.