Genome Therapeutics Corp. completed its merger with Genesoft Pharmaceuticals Inc. on Friday, and it raised $88.2 million in a public stock offering to prepare for the launch of Factive.
The offering was conducted in conjunction with the merger. Genome Therapeutics sold 16.8 million shares at $5.25 per share.
The company said in a prospectus that it intends to use the proceeds to fund the commercial launch of Factive, as well as for further clinical development of that product and its other candidates, including Ramoplanin. It also expects to use proceeds for working capital and general corporate purposes.
JP Morgan Securities Inc., of New York, was the offering's lead underwriter, with Legg Mason Wood Walker Inc., of Baltimore, also participating.
With the merger, Genome Therapeutics gains the North American and European commercialization rights to Factive (gemifloxacin mesylate), a fluoroquinolone antibiotic, which was approved in April for community-acquired pneumonia of mild to moderate severity and acute bacterial exacerbations of chronic bronchitis. The oral drug was discovered by Korea-based LG Life Sciences and later licensed by Genesoft. Genome Therapeutics expects to launch Factive in the U.S. sometime this summer.
Ramoplanin, which Genome Therapeutics licensed from King of Prussia-based Vicuron Pharmaceuticals Inc., is in Phase II and Phase III development in serious hospital-acquired infections.
Genome Therapeutics' officials were under an SEC-imposed quiet period and could not comment Monday.
As part of the merger, Genesoft shareholders are receiving about 1.2 shares of Genome Therapeutics stock for each share of Genesoft they own. Genome Therapeutics also assumed about $22 million in Genesoft debt. It issued promissory notes of Genome Therapeutics that are convertible, at the option of the holder, into shares of Genome Therapeutics common stock at about $6.64 per share.
With the financing and merger, the combined company has $110 million in cash and equivalents and 73.5 million outstanding shares. Shareholders will vote on a new name for the company in the coming months. Until then, it will retain the Genome Therapeutics name and trade on the Nasdaq National Market under the ticker symbol, "GENE." The company's stock closed Monday at $6.61, up 29 cents.
The merger was valued at $80 million when it was announced last November, at which point the stock was trading at $2.85 per share. (See BioWorld Today, Nov. 19, 2003.)
Based on the closing stock price Friday of $6.32 and the issue of 28 million shares, the merger is worth about $177 million.
The joint company, which plans to reduce redundancy and its investment in early stage discovery research, now has 60 employees in two offices and will expand its sales and marketing team prior to the launch of Factive. The company headquarters will be at Genome Therapeutics in Waltham, Mass., with some continued operations at Genesoft's facility in South San Francisco.
Life Science Group served as an adviser to Genome Therapeutics, while New York-based Merrill Lynch & Co. advised Genesoft.