BioWorld International Correspondent

LONDON - MediGene AG is acquiring Avidex Ltd. in an all-share deal that values the UK company at €50 million (US$64.3 million).

Existing investors in Avidex are putting in a further £3 million (US$5.7 million), and MediGene has agreed to a bank loan to fund development of the Avidex pipeline.

The deal, which has the approval of 90 percent of Avidex's shareholders, will give them 8.2 million MediGene shares, equivalent to 28 percent of the Martinsried, Germany-based company. The new shares are subject to a lockup for 12 months.

Avidex was spun out of Oxford University in 1999 to commercialize monoclonal T-cell (mTCR) technology for producing fully human, soluble T-cell receptors that recognize and bind to disease-specific antigens. The attraction of the technology over monoclonal antibodies is the ability of mTCRs to target intracellular targets. Avidex has raised £30 million since its formation.

In parallel with the mTCR technology, Avidex has been developing its lead product, RhuDex, an orally available small molecule for treating rheumatoid arthritis. The compound, which was in-licensed from Active Biotech AB, of Lund, Sweden, is designed to block the underlying disease process by blocking T-cell co-stimulation via the CD80 pathway. The product completed Phase I trials, and a Phase IIa is due to start shortly.

Avidex has a range of cancer and autoimmune product based on the mTCR platform technology in preclinical development.

Peter Heinrich, CEO of MediGene, said soluble T-cell receptors are one of the most modern concepts for treating cancer and autoimmune diseases. "The acquisition of Avidex is a major step forward for MediGene and makes our portfolio one of the strongest among the European biotech companies," he said. "Avidex's portfolio nicely complements our pipeline and offers additional partnering opportunities."

Neill MacKenzie, chief business officer of Avidex, told BioWorld International the deal was the best way of taking the mTCR technology forward in the current financing climate. The company has been exploring all options for raising more money since the beginning of the year. European venture capitalists declined to invest, and although there were offers from U.S. funds, or the option of listing on either the main market in London or the junior Alternative Investment Market (AIM), those were rejected as unsuitable.

"It's difficult to get cash from [European] VCs at the moment," MacKenzie said. "They are only interested if you have multiple products on the market or a late-stage portfolio. They aren't interested in risk anymore."

U.S. VCs wanted Avidex to set up a U.S. operation, but having managed North American subsidiaries before, that was not the way the directors wanted to go. While there was an offer of an IPO, both MacKenzie and CEO James Noble felt Avidex was not mature enough yet.

"James and I have both been involved in IPOs, and we thought that as a one-product company with a technology platform, it would be too risky for Avidex," MacKenzie said.

MacKenzie said there were plenty of offers for mergers, in the U.S. and Europe, but "the problem was most were doing it from a weak position."

Enter MediGene, founded in 1996 as a gene therapy company but subsequently transmuted into a specialty pharmaceutical company with the product Eligard on the market and polyphenon E under review by the FDA. MediGene acquired rights to Eligard, a treatment for hormone receptive prostate cancer, from Atrix Laboratories Inc. (subsequently acquired by QLT Inc.) in 2001. Polyphenon E, for treating genital warts, was in-licensed from Epitome Inc., of Halifax, Nova Scotia.

Following the acquisition of Avidex, MediGene is forecasting 2006 revenues of €20 million to €25 million and a net loss of €20 million. The company had cash of €45.7 million in June 2006.

"Apart from the fact that they have money and are the right size, what we really liked about MediGene is that they have a very good clinical development group. This complements Avidex's research activity," MacKenzie said.

Avidex will remain at its site in Oxford, and MacKenzie said there is no decision as yet about the name of the company. He will become responsible for commercial strategy and business development of the UK site, while Bent Jakobsen, Avidex founder and chief scientific officer, becomes senior vice president of research. James Noble is leaving the company but will join MediGene's supervisory board.