ViRexx Medical Corp. is looking to grow by acquisition after agreeing to buy a closely related and neighboring company, AltaRex Medical Corp., for about C$28.9 million.
The former is developing products for chronic hepatitis B and C and selected solid tumors, while the latter is focused on cancer therapies. Both are headquartered in Edmonton, Alberta, and were founded by the same individual, Antoine Noujaim. He serves as CEO of both companies, which also share other management members.
The transaction brings together compatible scientific platforms that harness a body's internal power to cure, combining ViRexx's earlier-stage pipeline and research discovery group with shorter-term revenue prospects offered by AltaRex's Phase III vaccine for ovarian cancer, OvaRex MAb.
"AltaRex is primarily an immunotherapeutics firm," said Rob Salmon, who serves as the chief financial officer for ViRexx and AltaRex. "ViRexx's lead drug candidates are HepaVaxx B and HepaVaxx C, for hepatitis B and C, and the science behind them is in immunotherapy as well."
Going forward, the combined entity's clinical pipeline will feature the aforementioned pivotal-stage product, as well as two in Phase I: BrevaRex, a vaccine for breast cancer and multiple myeloma, and Occlusin 50 Injection, a treatment for liver cancer and renal-cell carcinoma.
OvaRex MAb's rights in most of the world are licensed to Unither Pharmaceuticals Inc., a subsidiary of United Therapeutics Corp. The Silver Spring, Md.-based company is paying for all clinical development of the product, as well as any eventual regulatory proceedings. AltaRex has retained rights in most member nations of the European Union and certain other countries, where it has established other relationships. The same agreement is in place for BrevaRex.
Multiple preclinical product candidates include Occlusin 200 Injection, a treatment for uterine fibroids; the HepaVaxx B product, expected to enter Phase I in the first half of next year; and the HepaVaxx C product. ViRexx owns all rights to those products.
"There's a huge amount of synergy between the management of the two companies, and we also happen to share premises already," Salmon told BioWorld Today, adding that ViRexx had a staff of 23 prior to the deal while AltaRex employed three people. "The financial and some other operational risks you get with a merger are really nonexistent."
Terms of the agreement call for ViRexx to acquire all the issued and outstanding shares of AltaRex. It is intended that the transaction will be completed by way of a plan of arrangement and achieved through an exchange of shares. The deal values AltaRex at about C$28.9 million (US$23.1 million), and each AltaRex share at C55 cents, on the basis of the current share price of ViRexx of C$1.10, representing a 74 percent premium over the AltaRex weighted volume average share price of the past 30 days.
AltaRex has about 52 million shares outstanding, and ViRexx has about 27 million.
For each share owned, AltaRex shareholders will receive one-half of one common share of ViRexx; 60 percent of the shares of ViRexx received by AltaRex shareholders will be freely tradable immediately following completion of the plan of arrangement, and the remaining 40 percent will be subject to a six-month hold period.
In the end, AltaRex will own about 49 percent of stock in the combined company, which will continue under the ViRexx name. Its facilities are housed in 13,000 square feet of lab and office space, as both companies recently exited a site at the University of Alberta.
All outstanding stock options and warrants of AltaRex will be assumed by ViRexx, subject to adjustment in accordance with anti-dilution provisions in stock option plans and warrant agreements. The arrangement, which is expected to close next quarter, remains subject to approval of two-thirds of both companies' stockholders, approval of the Court of Queen's Bench of Alberta and obtaining regulatory approvals. Both companies' boards are recommending that their stockholders vote for the amalgamation.
The Toronto Stock Exchange has conditionally approved the listing of ViRexx's common shares, subject to the filing of required documents, some of which cannot be filed prior to the effective date of the arrangement.
If either company decides to cancel the arrangement, it would be required to pay a break-up fee equal to expenses incurred by the other party, not to exceed $150,000.
Canaccord Capital acted as the exclusive financial adviser in connection with the transaction.
On Friday, AltaRex's stock (TSX:ALT) gained C13 cents to close at C40 cents. ViRexx's shares (TSX:VIR) fell C3 cents to close at C$1.07.