Dendreon Corp. signed a definitive merger agreement to acquire Corvas International Inc. in a $72.9 million stock transaction that would combine the companies' cancer and cardiovascular pipelines and effectively double Dendreon's cash holdings.
"This deal represents two companies with strong financials coming together with clear synergies in oncology," Dendreon CEO Mitchell Gold told BioWorld Today. "In a depressed market, there are a lot of assets that are being overlooked because the market is becoming very cynical. But we think we have uncovered a gem in Corvas' oncology program, which fits in beautifully with what we're doing."
The transaction would leave Dendreon with about $110 million in cash, after paying off existing Corvas convertible debt. Each Corvas common share will be exchanged for 0.45 shares of Dendreon common stock based on Dendreon's Feb. 24 closing price of $5.79. Upon closing, expected in the second quarter, Dendreon would own about 68.6 percent of the combined company, with Corvas shareholders holding the rest.
Dendreon reported about $55 million in cash, cash equivalents and short-term investments for the nine-month period ended Sept. 30. Corvas reported about $95 million in cash, cash equivalents and long- and short-term securities that mature throughout the next year and a half.
Last month, Seattle-based Dendreon also filed a shelf registration statement that would allow it to sell from time to time up to $75 million of common stock.
"We both come to the table with extremely strong balance sheets from a cash perspective," said Gold, who would continue as CEO of the combined company. "When you have that much capital, you can obviously invest very heavily in your programs. And let me not make it uncertain - our No. 1 focus in the combined organization will continue to be Provenge."
Dendreon recently reported at the 13th International Prostate Cancer Update meeting in Vail, Colo., results from its first placebo-controlled Phase III trial of Provenge. The findings included long-term follow-up data from a patient who had a complete response and experienced durable remission following treatment.
Dendreon said it would use the results to establish with the FDA a pathway for a pivotal Phase III trial program. Dendreon recently said it would amend the protocol for a Phase III trial of Provenge to enroll only advanced hormone-resistant prostate cancer patients with a Gleason score of 7 or less - associated with a less aggressive form of prostate cancer but present in 75 percent of the target population. (See BioWorld Today, Dec. 6, 2002.)
Dendreon, which historically has focused on cancer vaccines, also would gain from San Diego-based Corvas potential cancer product opportunities in the field of serine proteases, which includes prostate-specific antigen.
"I think one of the things that attracted them to us is the fact that we have a very active cancer program," George Vlasuk, the chief scientific officer at Corvas, told BioWorld Today. "We have two different approaches using both monoclonal antibodies for inhibitors of the serine proteases, as well as actually utilizing the serine proteases to deliver cytotoxic drugs selectively to tumor cells."
In separate partnerships with Cambridge, Mass.-based Dyax Corp. and Fremont, Calif.-based Abgenix Inc., Corvas is developing serine proteases as monoclonal antibodies. On its own, Corvas also is developing small-molecule inhibitors of the enzymes and has developed protease-activated prodrugs. Vlasuk said the program includes multiple preclinical candidates, with its most advanced product involving the drug delivery approach. He added the company plans to advance a compound into clinical testing in the first part of next year.
"We brought late-stage oncology programs to the table, they brought earlier-stage oncology programs to the table," Gold said. "But theirs are really more diverse than ours in that they have the ability to target these proteases with a technology called Protease Activated Cancer Therapies, which I am very excited about."
He pointed to in vivo animal studies showing that the prodrug technology made the cancer drug doxorubicin more locally available - Corvas delivered a dose 20 times higher than normal, resulting in a higher cure rate with no toxicity.
Dendreon also would gain from Corvas a program in a different direction. Ongoing Phase II trials in patients with acute coronary syndromes treated with rNAPc2 will continue. The program is investigating the safety and efficacy of the recombinant nematode anticoagulant protein in three parts, each of which will investigate rNAPc2 in combination with current anticoagulant and anti-platelet therapies. Gold said that based on findings expected down the road from a 125-patient study of rNAPc2, already paid for by Corvas, Dendreon would weigh various options on the program's future, most likely including a partnership.
Beyond Provenge, the 116-employee company is expanding offerings from its vaccine platform, including APC8024 for breast, colon and ovarian cancers, a program completing Phase I. Another clinical candidate, Mylovenge, is in Phase II studies to treat multiple myeloma. The company also is involved in a collaboration with South San Francisco-based Genentech Inc. to develop monoclonal antibodies, small molecules and other products from Dendreon's preclinical Trp-p8 gene platform. Dendreon could gain more than $110 million from the deal. (See BioWorld Today, Aug. 14, 2002.)
Corvas' San Diego facility, which houses its 58 employees and would be used for further developing the serine protease program, also could be used to develop small-molecule inhibitors of Trp-p8 - Dendreon's primary responsibility in the Genentech collaboration.
"We think we have taken a significant step toward creating a top-tier biotech company, both financially and in terms of its product portfolio," Gold said. "With two companies coming together like this to build something durable, it's important to the industry overall."
Both companies' boards have unanimously approved the merger, though it remains subject to approval from their respective shareholders. Needham & Company Inc. and SG Cowen Securities Corp. advised Dendreon, while Lazard Freres and Co. advised Corvas.
Founded in 1987 with $3.7 million in funding from Hambrecht & Quist, Venrock Associates, Ventana Growth Fund, Centocor Inc. and Sorrento Associates, Corvas went public 11 years ago through the sale of 3 million shares priced at $12 apiece. (See BioWorld Today, Jan. 31, 1992.)
Dendreon's stock (NASDAQ:DNDN) fell $1.32 Tuesday, or 22.8 percent, to close at $4.47. Corvas' stock (NASDAQ:CVAS) gained 38 cents, or 26.8 percent, to close at $1.80.