Assistant Managing Editor

Archemix Corp. became the latest company to opt for the increasingly popular reverse-merger route, entering a definitive agreement with NitroMed Inc., a firm that had been reviewing strategic alternatives in the wake of disappointing sales figures for heart failure drug BiDil.

The all-stock transaction would leave a combined company operating under the Archemix name, with shareholders of the privately held Cambridge, Mass.-based firm holding 70 percent of the firm. NitroMed shareholders would own the remaining 30 percent.

The deal came only a few weeks after Lexington, Mass.-based NitroMed agreed to divest BiDil to JHP Pharmaceuticals LLC, of Parsippany, N.J., for $24.5 million in cash up front, plus up to an additional $1.8 million for closing date inventory. BiDil, a one-pill combination of isosorbide dinitrate and hydralazine hydrochloride, was approved in 2005 as a drug targeted specifically to African-American patients but failed to gain a significant market share due largely to the availability of the two generic components. (See BioWorld Today, Oct. 24, 2008.)

Proceeds from that sale, plus about $17.8 million in cash as of Sept. 30, would total about $44 million in NitroMed's coffers. Add to that the drastic restructuring undertaken at the beginning of this year, cutting 70 of 90 jobs, and NitroMed became a reverse-merger prospect.

With capital hard to come by and the initial public offering window shut, some private firms are eyeing companies like NitroMed, which essentially are public shells with, hopefully, a nice bit of cash in the bank. And the competition for those troubled public firms with cash is getting fierce.

Earlier this year, Point Richmond, Calif.-based Transcept Pharmaceuticals Inc. succeeded in signing a deal to merge with Novacea Inc., a failed public firm that had an impressive $100 million in cash. But, reportedly, more than 90 firms had been vying for the Novacea merger. (See BioWorld Today, Sept. 3, 2008.)

NitroMed President and CEO Kenneth Bate didn't give an exact number but told investors on a conference call that his firm had "evaluated a broad range of companies with which we might merge," before deciding on Archemix.

For its part, Archemix has raised about $100 million in venture capital since its 2001 inception, though most of its money in the last couple of years has stemmed from a series of partnerships involving its aptamer technology.

Pending completion of the merger, expected in mid-2009, the combined company would be "well positioned," financially, with a cash position of about $50 million to $60 million, Bates said.

Archemix's pipeline stems from its aptamer technology platform. Aptamers are synthetically derived oligonucleotides that company President and CEO Errol DeSouza described as "chemical antibodies," meaning they have the therapeutic advantage of antibodies but are chemically stable and offer less safety risk.

On its own, the firm is advancing products in rare hematological disorders, with the lead product, ARC1779, set to start Phase IIb testing in thrombotic microangiopathy and Phase IIa testing in carotid endarterectomy. ARC1779 is an aptamer drug designed to work by binding and inhibiting von Willenbrand factor to increase or restore platelet counts to normal levels.

Earlier in its pipeline, the company has ARC5692, which DeSouza said is gearing up for an investigational new drug application in mid-2009, and a preclinical program in hemophilia, which is "an ideal application for therapeutic aptamers," he added.

Archemix also seeks active partnerships with pharma firms working with aptamers in the oncology space. Among those collaborators is London-based Antisoma plc, which is progressing aptamer product AS1411 in Phase II trials in acute myeloid leukemia and renal-cell carcinoma.

Outside of hematology and oncology, Archemix licenses out its technology, and that strategy has provided "a major source of nondilutive revenue" for the company, DeSouza told investors on the call.

It has licensed rights to San Carlos, Calif.-based Nuvelo Inc., which has advanced NU172, a direct thrombin inhibitor, in Phase I development in patients undergoing coronary artery bypass graft (CABG) surgery. And Durham, N.C.-based Regado Biosciences is moving ahead with an aptamer product, REG1, based on Archemix's technology. REG1 is in Phase II trials in CABG surgery patients and in those undergoing percutaneous coronary intervention.

Following the merger's close, NitroMed's Bate will retain the role as president and CEO, though the remainder of the executive team - Duncan Higgons, Gregg Beloff, Page Bouchard and James Gilbert - will come from Archemix. DeSouza will serve on the combined company's board.

Funds affiliated with HealthCare Ventures LLC, Rho Ventures, Invus Public Equities and Care Capital LLC, which hold about 30 percent of NitroMed's outstanding stock, already have agreed to the transaction.

NitroMed's stock (NASDAQ:NTMD) closed at 27 cents Wednesday, down 12.9 percent, or 4 cents.

Archemix's investors include Atlas Venture, Prospect Venture Partners, Highland Capital Partners, SV Life Sciences, Rho Ventures, Care Capital, MDS Capital, POSCO BioVenture, US Trust and Athenian Venture Partners.

Archemix last raised money in 2004, with a $50 million Series B round. The firm filed to go public in 2007 but withdrew the application citing unfavorable market conditions.