Washington Editor
WASHINGTON — Less than two months after Nasdaq notified the company that its shares no longer met listing requirements, OraVax Inc. has announced an agreement to merge with Peptide Therapeutics Group plc.
The deal involves the purchase of OraVax shares and warrants by Cambridge, England-based Peptide for $15 million. Upon merger, the new company will have six products in clinical trials and four ready to enter trials in the next 12 months.
"This really creates a company with substantial critical mass," said Lance Gordon, president and CEO of Cambridge, Mass.-based OraVax. "We're a merger of two development-stage biotechnology firms with an existing relationship. This really was a natural."
The two companies became acquainted with one another about a year ago when they began a collaboration on a Helicobacter pylori vaccine to combat gastric ulcers. OraVax, with collaborator Pasteur Merieux Connaught (PMC) of Lyon, France, enlisted Peptide's expertise in live viral vector systems. The H. pylori vaccine will be one of the merged company's more advanced clinical products.
Under the terms of the merger, Peptide will purchase 95 percent of the outstanding 6 percent convertible preferred stock of OraVax at an aggregate price of approximately $3 million. The preferred stock held by Peptide will be retired upon completion of the merger, and holders of options and warrants for OraVax stock will receive options and warrants for Peptide ordinary shares in exchange.
"This transaction really preserved the best value for the stockholders and the company," Gordon said.
OraVax common stock holders will receive ordinary shares of Peptide at an exchange ratio that will be based on market rate. However, the price used to determine the exchange ratio won't be less than $1.49 or more than $2.24. Based on Peptide share prices on the London Stock Exchange of $1.87 on November 10, 1998, Peptide will issue approximately 6.4 million shares worth nearly $12 million. In the end, Peptide will have 42.8 million shares outstanding.
The shares issued to OraVax stockholders will likely be American Depositary Shares, which will be listed on Nasdaq.
Partner To Ensure H. Pylori Work Continues
In order to ensure that OraVax has enough working capital to continue its H. pylori programs, PMC has given the company a $3 million short-term loan. OraVax is using its partnership interest in a joint venture with PMC to secure the loan, which must be repaid in two installments, one of $2 million on January 31, 1999, and a $1 million payment due July 1, 1999.
The merger is contingent upon regulatory approval and approval by the stockholders of both companies. In addition, Peptide must raise additional working capital for the combined company under the rules of the London Stock Exchange.
"This is straight-line process from here," Gordon said. "There are no surprises."
The merged company, which may have a new name, will operate facilities on both sides of the Atlantic. Gordon said that vaccine development will be concentrated at the Massachusetts facility.
The merged company's most advanced product is Arilvax, a yellow fever vaccine in development by OraVax that will begin Phase III studies in the United States in 1999 and is currently marketed in several other countries. In addition to the H. pylori vaccine, the merged company will have an allergy vaccine, a typhoid vaccine and a tolerizing peptide against rye grass in Phase II clinical trials.
The company's preclinical work includes Japanese encephalitis and Dengue fever vaccines.
OraVax's stock (NASDAQ:ORVX) closed Wednesday at $0.469, up $0.0625. n