Continuing a late-year spending spree for biotech, GlaxoSmithKline plc is acquiring Praecis Pharmaceuticals Inc. in a cash deal valued at about $54.8 million.
The London-based pharma firm agreed to pay $5 per share, more than double Praecis' Wednesday closing price of $2. The news pushed the company's stock (NASDAQ:PRCS) up by 144.5 percent Thursday, gaining $2.89 to close at $4.89.
Under the terms, a wholly owned subsidiary of GSK will make the cash tender offer for all of Praecis' outstanding shares, followed by a second-step merger in which any untendered shares would be acquired at the same $5 price. The transaction was approved by both companies' boards and is expected to close in the first quarter. At that time, GSK will gain rights to Praecis' assets, which include cash and cash equivalents of $40.4 million, the early stage cancer drug, PPI-2458, and its DirectSelect platform, called a "good complement to our current drug discovery technology," by GSK spokesman Rick Koenig.
Praecis reported a net loss of $6.8 million, or 63 cents per share, for the third quarter, and for the Waltham, Mass.-based company, the deal comes at a time when it is struggling to find its way back into investors' good graces following its development and commercial setbacks of the past few years. In 2000, the company was at the top of its game, with a promising Phase III candidate in prostate cancer and a lucrative collaboration with one of biotech's top players. Praecis priced its initial public offering in April of that year, selling 8 million shares at $10 each. (See BioWorld Today, April 28, 2000.)
A year later, however, trouble arose. The FDA said data in the company's new drug application for Plenaxis, a gonadotropin-releasing hormone antagonist for prostate cancer, was inadequate for approval, and that setback cost Praecis its partnership with Thousand Oaks, Calif.-based Amgen Inc. Though Plenaxis ultimately gained approval in 2003, disappointing sales, due in part to the product's restrictive labeling, prompted the company to suspend marketing of Plenaxis two years later. In October 2005, Praecis halted development of Apan, an Alzheimer's drug candidate, and to conserve cash, it sold its research facility for $51 million and cut its work force from 182 to 75 employees. (See BioWorld Today, May 23, 2005, and Oct. 12, 2005.)
Praecis did not return calls seeking comment, but said it is focusing its resources on its drug discovery technology and its research and development program.
The DirectSelect program, which is designed to generate ultra-large libraries for the discovery of oral compounds for further development, was the subject of an April 2006 agreement with prospective buyer GSK. In that two-year deal, Praecis was to apply its DirectSelect technology to identify small-molecule candidates against targets selected by GSK. In exchange, GSK purchased $500,000 of Praecis' common stock, and agreed to make a $500,000 milestone payment for the first two compounds identified.
In its pipeline, Praecis has PPI-2458, which is in development for cancer, specifically non-Hodgkin's lymphoma and solid tumors. The company reported interim data from a Phase I trial earlier this year, showing that the oral small molecule appeared to be well tolerated in doses up to 8 mg, with the maximum tolerated dose yet to be determined. PPI-2458 is designed to target the methionine aminopeptidase-2.
The company also has a research program aimed at identifying selective S1P-1 agonist compounds to advance into clinical testing.
The deal to acquire Praecis is the fourth major announcement this month for GSK, which has been "working hard to move to the forefront of biopharmaceuticals" since 2003, Koenig said.
The firm entered an agreement to acquire privately held antibody firm Domantis Ltd., of Cambridge, UK, for $454 million in cash, and that deal is expected to close in January. Last week, GSK entered a potential $1.2 million alliance with Lexington, Mass.-based EPIX Pharmaceuticals Inc. to develop four G-protein-coupled receptors. And earlier this week, the company picked up rights to Copenhagen, Denmark-based Genmab A/S's Phase III-stage monoclonal antibody HuMax-CD20 in a potential $2.1 billion deal, which included an up-front payment of $102.8 million. (See BioWorld Today, Dec. 11, 2006, Dec. 13, 2006, and Dec. 20, 2006.)
Koenig said Praecis would become part of GSK's research and development operations, which supply leads to its drug development efforts, and "we anticipate that Praecis will work from its current location."
Canaccord Adams Inc. advised Praecis in the transaction.