Just weeks after reporting poor Phase II data on a congestive heart failure drug, Cardiome Pharma Corp. unveiled plans to expand its portfolio by acquiring Artesian Therapeutics Inc. in a deal that could be worth $64 million. But right now, the buyout won't affect the bottom line, as the final value is contingent on the clinical success of two investigational drugs.
"We've been looking to add cardiovascular drugs to our pipeline," Doug Janzen, Cardiome's chief financial officer, told BioWorld Today. He added that privately held Artesian's largest stockholder, Oxford Bioscience Partners LLP, has "been looking to put money into Cardiome" by way of a private investment, so the deal serves both purposes, as the venture capital firm agreed to buy $7.5 million worth of Cardiome shares when the transaction closes.
"They had some assets that were interesting," Janzen continued, "so this is a win-win situation in which we'll assume costs and apply our expertise to drive these programs forward, while they invest money into Cardiome that we can use on Phase I and II development. Once they get into Phase II, we'd be happy to spend our own working capital on these programs."
Artesian has two advanced small-molecule discovery programs in the area of congestive heart failure. Terms of the proposed buyout, for which Vancouver, British Columbia-based Cardiome has executed a letter of intent, call for back-end payments based on certain clinical milestones. Those payments could equal, in aggregate, $32 million for each of the first two drug candidates that receive FDA approval. And concurrent with closing, Oxford will buy a little more than a million Cardiome shares at about $7.24 apiece, which equals a 5 percent premium over the stock's previous five-day average closing price. Prior to the deal, there were 51.2 million shares outstanding.
"This is a transaction where we get two cardiovascular programs for not a lot of financial costs other than funding them going forward," Janzen said, adding that the deal's structure includes no royalty obligations. "If they start working - Phase II, Phase III, approval - then we'll start spending some milestones."
The lead program is focused on a series of dual-pharmacophore compounds designed to simultaneously inhibit the cardiac phosphodiesterase enzyme (PDE3), causing inotropic effects while inhibiting the L-type calcium channel to protect against calcium overload. The second program focuses on a strategy to attenuate the deleterious effects of the excessive neurohormonal activation that occurs in congestive heart failure.
Janzen said both are about a year away from clinical development.
The programs represent different approaches to congestive heart failure than oxypurinol, the Cardiome drug that recently missed the primary and secondary endpoints in a Phase II trial. (See BioWorld Today, Aug. 16, 2005.)
Artesian, of Gaithersburg, Md., was founded in March 2002 to discover and develop bi-functional small-molecule drugs for the treatment of cardiovascular disease. It has less than 10 employees and raised about $5.7 million in a single venture capital round.
"We're not buying Amgen here," Janzen said, "but we think it's a pretty risk-free transaction for us."
The deal remains subject to completing due diligence, final board approval, settling and executing definitive documentation, regulatory approval and other customary closing conditions. It is expected to close in October.
Beyond congestive heart failure, Cardiome's primary focus lies in atrial arrhythmia. Later this year or early next year, the company plans to file a new drug application for an intravenous version of RSD1235, which it also is developing as an oral drug to maintain normal heart rhythm.
As of June 30, Cardiome had about $84.8 million in cash, cash equivalents and short-term investments. On Monday, its shares (NASDAQ:CRME) rose 9 cents to close at $7.17.