Seemingly out of the blue, Xenova Group plc is being sold.
Board members of the British biotech firm agreed to a buyout for up to £26.1 million (US$47.5 million) by Celtic Pharma Group, a new private equity business, after reaching terms on the offer concurrent with a licensing deal between the parties for two Xenova products. Celtic Pharma, which is being led by former pharmaceutical executives and is looking for additional deals to take biotech programs through to approval and then deliver marketable products to big pharma, would acquire the entire issued and to-be-issued share capital of Xenova.
Xenova's shares gained about 10 percent on the London Stock Exchange (LSE:XEN) and about 8 percent on Nasdaq (XNVA). The deal is expected to close in August.
Except for certain restricted shares, stockholder of Slough, UK-based Xenova would be able to elect one of three choices - secured loan notes, cash or a blend of the two - in exchange for their stock. Each choice carries a different valuation of the company.
The secured loan note offer values Xenova's existing issued share capital highest, about £26.1 million, and each share at about 6.044 pence. That represents a 56 percent premium to Thursday's 3.875 pence closing price on the stock, the last trading day immediately prior to the announcement.
The cash and secured loan note alternative values the company at about £24.8 million and each share at about 5.75 pence, a 48 percent premium, while the cash option values Xenova at about £19.4 million and each share at 4.5 pence, a 16 percent premium. The company's directors have not taken a position as to the relative merits of the three options, though they said they believe terms of the cash alternative to be fair and reasonable.
The simultaneously executed licensing deal provides exclusive worldwide rights to Xenova's nicotine and cocaine vaccines for addiction, TA-NIC and TA-CD, to Celtic X Licensee, a member of Celtic Pharma. Both products are in clinical development, and Xenova's pipeline also includes another clinical-stage product, a Phase III drug called TransMID for the glioblastoma multiforme type of brain cancer.
Separately, Celtic X Licensee agreed to a $20 million secured loan facility to Xenova for working capital. Neither the license agreement nor the loan is conditional upon the buyout becoming effective.
The newly launched Celtic investment fund has some $125 million committed and closed from investors around the world, and said significant further amounts would be closed in the coming months. Celtic Pharma said its objective is to grow to $300 million by the end of this year and to more than $1 billion in the next year or two, positioning itself "between cash-starved biotech companies and earnings-pressured big pharma" to directly invest in the acquisition and development of pharmaceutical products.