SuperGen Inc. plans to acquire Sparta Pharmaceuticals Inc. in a stock deal worth nearly $7 million, giving Sparta shareholders about 3 percent of SuperGen.
The deal, already approved by boards at both companies, will bring a pipeline to SuperGen very similar to its own - cancer drugs, a delivery technology and one diabetes candidate. Sparta, of Horsham, Pa., could no longer go it alone, because it was running short of cash and couldn't raise adequate funding with its stock selling at about 25 cents per share.
"We've been talking to them for a over a year [about possible license deals or acquisitions]," Joseph Rubinfeld, SuperGen's chairman, president and CEO, told BioWorld Today. "With their stock price, it made sense to buy the whole company. Any time you can acquire compounds in Phase III you should jump at it in this business. I like to see drugs already in people before I make bids on them."
Sparta brings to the table a delivery technology called Spartaject, which allows for the injection of water insoluble materials without the need for organic solvents. Essentially, it is a microparticulate lipid suspension system. The company is close to entering pivotal trials delivering busulfan, a compound used to prepare patients for bone marrow transplants.
Rubinfeld said another Sparta program of interest is 5-FP, an oral formulation that the liver converts into the cancer drug 5-FU, which is completing a Phase I trial. Sparta has a series of other compounds in early development, two of which are being supported by National Cancer Institute grants.
Sparta Down To $3M In Cash Before Acquisition
Sparta's operations will move to SuperGen's facilities in San Ramon, Calif. The 8-year-old company, which ended the year with eight employees and nearly $3 million in cash, just couldn't make it on its own in the current environment.
"It was very difficult for us to raise the funds we needed to, with our stock price so low," Jerry Hook, Sparta's chairman, president and CEO, told BioWorld Today. "We don't want to dilute our investors, but we feel the technology is worth developing. With significant clinical trials ongoing and the opportunity to develop our drugs, we needed more money. This seems the logical way to continue the progress of these compounds.
"The only real alternatives," Hook added, "were doing a deal a deal like this or trying to license-out or sell individual products. That might have generated a little money in the short term, but didn't give us long-term viability. We decided we wanted to enter into a relationship like this before we ran out of money."
Sparta shareholders will get 650,000 SuperGen shares, most of them going to holders of Sparta preferred stock, who must agree to give up their liquidation preference to make the deal work. The exchange marks a premium of about 65 percent to Sparta shareholders, based on Friday's closing prices.
SuperGen's stock (NASDAQ:SUPG) fell 6.25 cents Tuesday, closing at $10.50. At that price, the value of the deal is $6.8 million. Sparta (OTC:SPTA) gained 13 cents per share, or 56 percent, to close at 36 cents.
SuperGen has a portfolio of generic cancer drugs including the already-marketed mitomycin and etopocide. It has filed abbreviated new drug applications for paclitaxel and daunorubicin. And the company markets Nipent for hairy-cell leukemia. One of the focuses is developing what the company calls "Extra" formulations of drugs, with advantages in solubility and stability, as well as doing away with extravasation.
"One of our strategies is to market the generic while we work on the improved version," Rubinfeld said.
SuperGen's primary product in development is RFS 2000, which is in Phase III trials for pancreatic cancer. Studies are being planned for other indications.
Other products in Sparta's pipeline include RII retinamide, a drug for cancer of the bone marrow that is in Phase I/II trials; PZG, a compound for diabetes that is through Phase I studies; Spartaject Temodal (temozolaine), a cancer agent in preliminary development with Schering-Plough Corp., of Madison, N.J. (Schering-Plough's version is awaiting FDA approval); and LEX 032 and IpdR, both of which are preclinical cancer programs supported by Small Business Innovation Research grants.
"We talked to many companies," Hook said, "but we felt SuperGen was the best partner, because of its experience with the same kinds of drugs we're working on." n