A week after it reported raising $14.5 million in first-round private financing, Chelsea Therapeutics Inc. decided to go public.
The Charlotte, N.C.-based company signed a reverse merger agreement with Ivory Capital Corp., of Littleton, Colo., to create a publicly listed company. Both companies' boards approved the agreement, expected to be completed by the first week of February.
"We were quite happy with the amount of money we raised, and so we were not looking for any additional cash in the short term, which would have been the route of filing an IPO," said Simon Pedder, Chelsea president and CEO.
While completing the Series A round, Pedder said he discovered a number of institutional traders who were interested in Chelsea but leery of investing in a company not traded publicly.
"So we had been looking for such opportunities whereby we could find a company that didn't have any issues and had a structure suitable for this type of transaction," he said. "This kind of fell into our lap, so we decided to take advantage of it."
Ivory Capital, which traded on the Over-the-Counter Bulletin Board, had been inactive since 1992, had no material operations or revenues and was looking to merge with a company that had ongoing operations. Under terms of the agreement, a subsidiary of Ivory will be merged with Chelsea in a stock-for-stock transaction. Ivory will issue shares of its common stock to Chelsea shareholders, who will then own 96.75 percent of the merged company. Current Ivory shareholders will hold the remaining 3.25 percent.
Ivory's stock (OTC BB:IVRC) jumped 25 cents Friday, or 22.7 percent, to close at $1.35 on volume of 14,712 shares. Its average volume is 111 shares.
Pedder said he was not able to disclose further details at this time, due to SEC restrictions. The merged company will continue to be known as Chelsea Therapeutics and be based in Charlotte. Pedder said he and his management team will continue to push the company's products into clinical trials.
"We're going to be quite aggressive, I think, in trying to increase the depth and variety of our pipeline," he said.
Chelsea already has funding for at least the next 18 months. On Jan. 11, the company reported the completion of Series A financing, raising a total of $14.5 million, including a $4.4 million overallotment option. Pedder told BioWorld Today those funds would be used to move its lead drug into clinical trials, as well as fund preclinical screening of additional compounds and provide money for licensing fees. Paramount BioCapital Inc. in New York acted as the placement agent. (See BioWorld Today, Jan. 13, 2005.)
Chelsea, which was founded as Aspen Therapeutics Inc. in 2003, changed its name after relocating from New York to Charlotte in July.
The company bases its product development on antifolate compounds it licensed in March from the University of South Alabama College of Medicine. Structurally related to folic acid, antifolates have been used for the past few decades as antagonists that inhibit the enzyme dihydrofolate reductase (DHFR).
Chelsea's lead drug, CH-1504, is designed as an alternative to methotrexate, the most common antifolate used to treat rheumatoid arthritis, psoriasis and cancer. The company said its product would work like methotrexate, but without undergoing metabolism that can create toxicity and tolerability issues.
CH-1504 previously was tested in a six-month pilot study involving 20 patients with rheumatoid arthritis, and Chelsea said its product was shown to be more efficacious and better tolerated. The company expects to file an investigational new drug application later this year, after initiating Phase I trials in the UK.
Chelsea also is working on preclinical screening for other molecules that could be developed into drug candidates and is in negotiations with companies to in-license additional compounds.