Creating a company focused on eight central nervous system therapeutics, Axonyx Inc. and TorreyPines Therapeutics Inc. signed a definitive merger agreement.
The deal gives privately held TorreyPines access to the public markets and provides a new home for Axonyx's three products, including Phenserine, which failed in a Phase III trial in Alzheimer's disease in February 2005.
"Since then, we've been looking to enhance our pipeline of compounds and diversify the risk for our shareholders," said Colin Neill, Axonyx's chief financial officer. "Our initial focus was to look at compounds to in-license, [but] what we found was the compounds were really earlier than we wanted and the later-stage ones were more expensive than we wanted."
The initial licensing talks then led to merger discussions with several companies, including TorreyPines, which has a pipeline of pain and Alzheimer's disease drugs that seemed to fit well with Axonyx. And with a combined $80 million in pro-forma resources as of March 31 ($54 million from Axonyx and about $26 million from TorreyPines), there is "enough cash in the combined companies to move those products forward," Neill said.
The exact value of the deal and the number of shares issued by New York-based Axonyx were not disclosed, but Neill said it is an equity split based on the portfolios of each company and not necessarily reflective of the current stock price. Axonyx's stock (NASDAQ:AXYX) fell 1 cent Thursday to close at 94 cents.
Once combined, the company would take on the TorreyPines Therapeutics name and be based in San Diego, where that company's 46 employees work. TorreyPines' management will lead the company, with Neil Kurtz at the helm as president and CEO.
He told BioWorld Today that the merger helps TorreyPines broaden its portfolio, bringing the total of its Alzheimer's disease candidates from three to six.
Axonyx's former shareholders would own about 42 percent of the new entity, while TorreyPines stockholders would have a 58 percent stake, assuming neither company out-licenses any products prior to closing. TorreyPines preferred shareholders also would receive warrants to buy shares in the new company that, if exercised in full at closing, would push up TorreyPines' stake to about 62 percent.
The boards of both companies have unanimously approved the deal, which is subject to Axonyx maintaining certain minimum cash levels and each company obtaining stockholder approval.
Founded in 2000, TorreyPines was known as Neurogenetics Inc. until March 2005 when it changed its name because the former designation suggested only neurological capabilities. Torrey Pines is a region of San Diego. Through the merger, TorreyPines - which has raised about $70 million since inception - gains access to the public markets through a Nasdaq listing. Upon closing, expected in the fourth quarter, the new company would trade under the symbol "TPTX."
"We'll become a public company as a result of this, and we also have significantly strengthened our balance sheet," Kurtz said. "It's an IPO-plus. We get the benefits of the IPO, strengthen our balance sheet and bring in some very interesting assets." The combined board will consist of three members from Axonyx and five from TorreyPines. Axonyx's six employees would help through the transition, but none would "remain with the new company," Kurtz said.
Founded in 1996, Axonyx gained its Nasdaq listing in 1999 through a merger with the public shell company, Ionosphere Inc., of Las Vegas.
Initially, the new entity would focus on migraine, chronic pain and Alzheimer's disease, as it advances eight products. TorreyPines' lead, tezampanel, is set to enter a Phase IIb trial for migraine, and it expects to file an investigational new drug application to start a Phase I trial of NGX426, an oral prodrug of tezampanel, for migraine and chronic pain. Tezampanel is an AMPA/kainite receptor antagonist that may offer, along with NGX426, a way to relieve migraine and chronic pain through a mechanism not tied to the side effects and risks associated with current treatments.
Axonyx's lead compound for Alzheimer's disease, Phenserine, is in Phase III development. With a dual mechanism of action, it is designed to inhibit the enzyme acetylcholinesterase and lower A beta 42, suggesting it may be able to slow disease progression while improving memory and cognition. Acetylcholinesterase is active in the nerve synapse that degrades the neurotransmitter acetylcholine in the brain and other tissues of the body, whereas A beta 42 is a peptide involved in creating the amyloid plaques found in Alzheimer's disease.
Phenserine failed in its initial Phase III, missing statistical significance over placebo in improving memory and cognition. It is licensed in South Korea to Seoul-based Daewoong Pharmaceutical Co. Ltd., and the new entity intends to license it out for all other markets.
Axonyx took Phenserine through three late-stage trials and does not intend to do more on its own, Neill said, adding that they are "too big, too risky and too expensive."
The company plans to complete Phase I trials with Posiphen to treat Alzheimer's disease progression, and it expects Phase I single-dose data soon for the AD candidate, NGX267, a muscarinic or M1 receptor agonist, and to start a Phase II multiple-dose trial. Posiphen is believed to work through RNA translational inhibition.
A sixth product in the combined pipeline is BNC, Axonyx's highly selective butyrylcholinesterase inhibitor to treat severe Alzheimer's disease, for which a Phase I trial should begin soon. Two other preclinical candidates, a follow-on M1 agonist NGX292, and a gamma-secretase modulator, NGX555, also target Alzheimer's disease. Both are from TorreyPines.
Piper Jaffray & Co., of Minneapolis, served as financial adviser to TorreyPines in the transaction, while New York-based Banc of America Securities LLC served as adviser to Axonyx.