Vaccines company Epimmune Inc. signed a definitive agreement to merge with Paris-based Immuno-Designed Molecules SA in an all-stock transaction.
IDM shareholders will receive about 3.8 shares of Epimmune common stock for each IDM share they hold. The new company, IDM Inc., will be located at Epimmune's headquarters in San Diego, with manufacturing sites in Irvine, Calif., and Paris.
The goal is to create a leading company focused on immunotherapeutics, with an improved cash position, a more mature pipeline and nearer-term product revenue opportunities. It brings together IDM's delivery and production expertise with Epimmune's epitope target identification capabilities.
"We, in the past, were trying to combine resources with another company," said Emile Loria, president and CEO of Epimmune. "The problem was the lack of cash. This time we have a company that has $41 million on the balance sheet. So we have been avoiding the risk for the shareholders this time."
Epimmune previously had planned a $13.5 million merger with Menlo Park, Calif.-based Anosys Inc., but it fizzled in 2003 when a financing fell through. (See BioWorld Today, Aug. 14, 2003.)
Boards of both IDM and Epimmune have given their blessing to the merger, which also is supported by certain institutional investors, strategic partners and IDM executives who collectively hold more than 85 percent of IDM's outstanding stock. The closing is expected in the second or third quarter and is subject to Epimmune shareholder approval, as well as their vote for a 1-for-4 reverse stock split.
The transaction partly includes about 2.1 million IDM shares sold in December for about $8.41 a share, raising $17.7 million. Each of those shares will be traded for about 3.8 Epimmune shares, each priced at $2.23 - a 70 percent premium to the closing price Monday of $1.31 per share.
The company's stock (NASDAQ:EPMN) rose 11 cents Wednesday to close at $1.43. At closing, shares of the new company will be traded on the Nasdaq National Market under the symbol "IDMI," and there will be about 102 million shares outstanding.
Epimmune shareholders will have a 22 percent stake, while IDM shareholders will own the rest. The companies will keep all 150 employees, and IDM's CEO Jean-Loup Romet-Lemonne will continue as CEO of IDM Inc., while Loria will serve as president and chief business officer.
Epimmune develops vaccines for cancer and infectious diseases, while IDM specializes in immunotherapy to treat cancer. The companies first worked together in 2003 when IDM in-licensed Epimmune's epitope technology to use in its U.S. colorectal cancer trials.
Together, they will focus on seven product candidates in clinical trials for cancer and infectious diseases. Four come from IDM, including Mepact, which has completed a Phase III trial for osteosarcoma; Bexidem, which is in Phase II/III development for bladder cancer; Uvidem, which is in Phase II for melanoma and is licensed to Paris-based Sanofi-Aventis Group; and Collidem, a Phase I/II product for colorectal cancer. Epimmune will bring three products to the joint company: EP-2101, a Phase II product for non-small-cell lung cancer; EP HIV-1090, which is in Phase I/II for HIV; and EP-HBS, a Phase I product for hepatitis B that is licensed to Innogenetics NV, of Ghent, Belgium.
As for IDM's Mepact, it has orphan drug status in both the U.S. and the European Union for osteosarcoma. IDM Inc. will work with regulatory agencies to gain marketing approval, expected in 2007.
"The Phase III has shown a clear benefit for those patients," Loria told BioWorld Today, "and those patients are young adults that don't have many alternatives today for the benefit of surviving.
"This is an important product that we expect to sell ourselves," he said.
Looking at 2004's balance sheets, the combined company will have about $41 million in net cash when figured on a pro-forma basis and after estimated transaction expenses. The funds should cover operations for 18 to 24 months.
While there are no plans for a financing, Loria said one could be conducted later this year.
"As usual for biotech, we have to be opportunistic," Loria said. "If there is a possibility, at some point in time, it is appealing for some investor, we would not reject that."
Holders of Epimmune's Series S and S-1 preferred stock have agreed to exchange those shares into Epimmune common stock. Jefferies & Co. Inc. is acting as financial adviser to Epimmune, while UBS Investment Bank is advising privately held IDM.