LONDON ¿ In the first major move toward consolidation in the U.K. biotechnology sector, Therapeutics Antibodies Inc. (TAB) and Proteus International plc, both quoted on the London Stock Exchange, are to merge in an all-stock deal.
The share-for-share merger is accompanied by a rights issue at 40 pence per share to raise #7 million (US$11.17 million). On completion TAB shareholders will receive 1.163 Proteus shares for each TAB share. If the deal goes ahead the company is on track to become the first U.K.-registered company with FDA approval to market a biotech drug in the U.S.
TAB aggressively has been seeking a merger, and made a number of other overtures before agreeing to join forces with Proteus, which also was looking for a partner. The rationale has less to do with complementary technologies than with the trials of life as a small-cap biotech company.
TAB specializes in polyclonal antibodies, while Proteus was formed around computer-aided drug design technology it has used to generate its portfolio.
James Christie, manufacturing director of the unnamed merged company, told BioWorld International that the synergy between the two companies was based on complementary product portfolios rather than on similar technologies. ¿TAB has got a short-term-to-market portfolio in its anti-venom products, while Proteus has got more medium prospects, including one, its angiotensin anti-hypertension drug, which is a potential blockbuster.¿
He added, ¿There is some crossover in terms of the focus on immunotherapeutics, and the combination will create something unique in the sector ¿ a U.K. biotech with a broad focus on immunotherapy.¿
The deal values TAB, which floated in 1996 at #5.25 per share, at 45.9 pence per share or #23.9 million in total, based on the closing price for Proteus shares of 39.5 pence on May 19. The combined company will have a market capitalization of #63 million. The strategy now is to build the market cap through mergers and acquisitions.
¿You have to look at the sector overall ¿ there is not enough room for 400 listed companies, let alone all the private ones, Christie said. ¿It is ripe for restructuring. For the first time this deal will bring about a significant consolidation in the U.K. sector.¿
The merged company will be based at Proteus¿ headquarters in Macclesfield, Cheshire, with an office in London and a manufacturing facility in Wales. The winding down of TAB¿s existing U.S. headquarters in Tennessee will continue, but the company will retain an operation of about 20 employees to deal with FDA clinical and regulatory affairs. The merger will need to be cleared by the U.S. Securities and Exchange Commission before the companies seek shareholder approval.
Following the rights issue, the merged company will have about #12 million in cash, which Christie says will be sufficient to fund it through to profitability. TAB is expecting the launch of its CroTAb antivenom product, designed to neutralize bites from poisonous North American snakes, by the third quarter this year. n