Looking to achieve a bit of corporate bliss, eXegenics Inc. and Innovative Drug Delivery Systems Inc. on Friday signed a definitive merger agreement in a deal valued at $46 million.
"I think it's a real marriage," said IDDS Chairman and CEO Mark Rogers, who will become executive chairman of the combined company.
He said his background in advancing products through clinical development fits well with the talents of eXegenics President and CEO Ronald Goode, who brings to the table experience in regulatory affairs. Goode, who will continue in those roles at the combined company, said his company's 14 Dallas employees and IDDS's 18 New York employees would remain in place.
"Our skill sets are complementary, so I see that this is really an outstanding opportunity for both of us to complement our extensive experience with those assets in another individual, which you couldn't get in one lifetime," Rogers said.
In the stock-for-stock exchange, one share of privately held IDDS will be exchanged for 3.132 shares of eXegenics common stock. eXegenics, which has about 20 million fully diluted shares outstanding, will issue about 60 million shares of common stock, including shares that will be issued for outstanding IDDS options and warrants, in exchange for all of IDDS's outstanding equity interests.
Though Goode said he expects the new company to be renamed, from the start it retains the parental name eXegenics. The transaction is to be a tax-free reorganization.
Following the merger, the combined entity will gain from IDDS three lead drugs, two of which have completed Phase II clinical studies. The candidates, which have demonstrated safety and effectiveness in early and mid-stage clinical trials, are all uniquely formulated versions of an FDA-approved compound. They also now hold significant value for eXegenics.
"The technologies at eXegenics are not complementary, per se, in terms of any synergistic sense with what is available here at IDDS," Goode said. "But our board realized that commercialization is the key to increased shareholder value. Therefore, we jointly made the decision to go out and find a partner that had products that would put us much closer to the commercial marketplace."
eXegenics in late June said enzyme targets to which it has rights could potentially further develop drugs to fight tuberculosis. Also this summer, the firm advanced into preclinical development a series of lead candidates that demonstrate in vitro activity against methicillin-resistant Staphylococcus aureus. eXegenics' research platforms, Quantum Core Technology and Optimized Anti-Sense Inhibitory Sequence, are designed to accelerate drug discovery.
IDDS products in clinical development in the U.S. and Europe include intranasal ketamine, intranasal morphine and intravenous diclofenac. The first two have completed Phase II studies on hundreds of U.S. patients, while the last completed a 250-patient Phase II study in England and has been approved to begin Phase I/II in the U.S.
"We wanted to [acquire] products with low clinical risk," Goode said. "Another criteria would be late-stage development, again meaning lower risk. That's what these products are."
The companies said the new entity's initial focus would center on developing drugs to treat acute and chronic moderate to severe pain syndromes. Both the intranasal formulations of ketamine and morphine are being developed to treat acute pain and acute episodes of chronic moderate to severe pain. The intravenous diclofenac product is to treat acute moderate to severe pain.
"We're focused in pain because it's an enormously growing market," Rogers said. "The reason it's growing, among other reasons, is the fact that there is an aging population and there are more patients who have now survived cancer but have treatment problems regarding pain."
He said IDDS has been involved in development through funding from the National Cancer Institute, a unit of the National Institutes of Health in Bethesda, Md. Rogers also noted a Department of Defense grant to develop pain drugs for mass-casualty management.
He said IDDS has worked to retain commercialization rights for its candidates by not selling anything downstream, an effort likely to continue with the combined entity.
"We reported $22 million in cash at the end of the first half," Goode said, "and we think that the programs are such that we can mange the cash available to go forward."
Both parties said they expect to complete the merger before the end of the year. As part of the transaction, the companies agreed to a breakup fee payable in certain circumstances of $2 million in cash from eXegenics, or $2 million in cash or $4 million in royalties from IDDS.
Shares of eXegenics (NASDAQ:EXEG) fell 3 cents Friday to close at 73 cents.