BioWorld International Correspondent
LONDON - Consolidation continues in the UK as Xenova Group plc last week announced an agreed-to £8.48 million (US$13.5 million) all-share takeover offer for KS Biomedix plc (KSB).
"This is a small but very useful transaction for us," David Oxlade, CEO of Xenova, told BioWorld International. "It gives us a late-stage product, TransMID, in Phase III, and brings in £7.4 million cash."
KSB CEO Steve Powell and Chairman Ian Miscampbell are leaving and the company's facilities in Guildford and Farnham will close, with key staff transferring to Xenova's headquarters in Slough. Total cost savings of £10 million per annum are promised once the acquisition is completed at the end of 2003.
"This is a very good transaction for both sides and positions Xenova rather better to build a European oncology company," Oxlade said.
Xenova is offering 1.0714 new Xenova shares for every KSB share, valuing them at 13.12 pence, based on Xenova's closing share price Aug. 13 of 12.25 pence. In addition, if KSB's brain tumor treatment TransMID reaches the U.S. or European market by Aug. 14, 2011, shareholders would receive further Xenova shares valued at £6.46 million.
Xenova has secured acceptances from shareholders representing 48.3 percent of the KSB shares.
The combined entity would have a market capitalization of about £30 million, £2 million less than Xenova's valuation in early May before the news that its partner, QLT Inc., of Vancouver, British Columbia, was stopping Phase III trials of Xenova's tariquidar, an adjuvant treatment intended to prevent multidrug resistance to cancer chemotherapy.
Since then Xenova has started a wide-ranging restructuring to conserve cash, cutting headcount from 107 to 66. Oxlade said the acquisition of KSB provides the opportunity for further cost cutting. Apart from closing facilities in Guildford and Farnham, Xenova intends to consolidate its manufacturing facilities in Edmonton, Alberta, and Cambridge, UK. One option under consideration is to sell off one of the sites while having a supply agreement with the acquirer. KSB also has a joint venture, Discerna Ltd., a specialist in ribosome display technology, which will be sold.
Apart from TransMID, KSB brings two further clinical programs to add to Xenova's nine-strong pipeline. KSB was founded to commercialize polyclonal antibody technology. That failed in clinical trials in inflammatory diseases but is still alive as a targeting mechanism in cancer treatments, including KSB 303, which just started a Phase I trial in pancreatic cancer.
Oxlade said, "We will complete this trial and then take a view," adding, "The polyclonal antibody intellectual property will be very useful going forward."
With the Phase III data for tariquidar still under review by QLT, Xenova's lead product would be TransMID. But the company will need to raise more money before it can start the Phase III trials, which have an £18 million price tag.
KSB had planned to carry out one large Phase III trial at a cost of £17 million. Now the plan is to carry out two smaller trials at a cost of £9 million each, with the aim of finding a U.S. partner if the first trial is positive. The product, which has FDA fast-track status, is partnered in Europe, India and Japan. Oxlade said, "It has not been decided how much to raise, or the specific timing. We currently have in excess of one year's cash."
The KSB name would be the fifth to disappear from the roster of companies quoted on the main market of the London Stock Exchange in as many months, following Oxford GlycoSciences plc, acquired by Celltech Group plc; PowderJect Pharmaceuticals plc, acquired by Chiron Corp.; British Biotech plc, which changed its name to Vernalis when it acquired that company; and CeNeS Pharmaceuticals plc, which moved its listing to the Alternative Investment Market.