With a strategy to build its pipeline of biodefense products, privately held PharmAthene Inc. signed a definitive merger agreement with SIGA Technologies Inc. in a deal that, once consummated, would provide PharmAthene with a public stock listing.
As it has become more difficult for biotechnology companies to conduct high-value initial public offerings, many have turned to mergers as a way to access the public markets. But PharmAthene, of Annapolis, Md., a listing on Nasdaq is just a bonus.
The company's main interest in SIGA is its small-molecule therapeutic, ST-246, for smallpox and other orthopox virus infections, as well as its 40-person research facility in Corvallis, Ore.
"In addition to their procurement-stage candidate, they have an outstanding research organization," said Stacey Jurchison, PharmAthene's director of education.
The value of the merger will be disclosed in a week or two within an SEC filing, but PharmAthene's shareholders will hold about two-thirds of the company, with SIGA's shareholders getting the remaining third.
PharmAthene currently has 70 employees and plans to keep all of SIGA's employees.
"A lot of the employee base at SIGA is the research function," Jurchison said, "and we highly value that function and anticipate bringing all employees on board."
Dennis Hruby, SIGA's chief scientific officer, will continue to lead the research facility in Oregon, while David Wright, president and CEO of PharmAthene, will serve as president and CEO of the combined company.
The merger is expected to close in the third quarter.
Thomas Konatich, chief financial officer and acting CEO of New York-based SIGA, said his company has a "fair amount of preclinical development work already done on a number of additional products" beyond ST-246 at its research facility. ST-246 is in Phase I human safety trials
The merger is good for both companies, he said, with SIGA gaining a management team that has been involved in the marketing of more than 50 pharmaceutical and biotech products. They have "expertise in areas that we have not addressed," Konatich said.
Putting both pipelines together creates a biodefense company with products that target three of the top five priorities under Project BioShield, and makes the new entity a "significant player in this marketplace," Konatich said.
PharmAthene brings to the mix two other procurement-stage products: Valortim, a fully human monoclonal antibody being co-developed with Medarex Inc., of Princeton, N.J., to prevent and treat anthrax infection; and Protexia, a bioscavenger to prevent and treat organophosphate nerve agent poisoning.
The first has completed Phase I safety testing with results expected later this year, while PharmAthene is working to file an investigational new drug application to begin clinical studies of Protexia within the next few years. PharmAthene acquired Protexia through its buyout in 2005 of Montreal-based Nexia Biotechnologies Inc.
Procurement-stage products are those that could be selected by the U.S. government for a national civilian stockpile or by the Department of Defense for military use.
"In biodefense, there's a bit of a different clinical pathway than with traditional pharmaceuticals," Jurchison said, explaining that each product must show efficacy in two animal species and demonstrate safety in humans. Efficacy in humans is not required since an outbreak of anthrax or smallpox, for instance, would have to occur for trials to be done.
"Products can be procured prior to FDA approval" as part of Project BioShield, Jurchison said. "It compresses some of the window of time that would be necessary under a traditional pharmaceutical approval."
Founded in March 2001, PharmAthene has raised about $60 million through three venture capital rounds. It also has retained funding through U.S. government sources.
SIGA was founded in 1995. Its stock (NASDAQ:SIGA) rose 7 cents Friday to close at $1.37.
WR Hambrecht + Co., of New York, and Sutter Securities Inc., of San Francisco, acted as financial advisers to PharmAthene and SIGA, respectively.