A struggling Rockville biotech wants to form a new company with an Australian drug-maker in a $54 million deal, but its shareholders might balk, according to analysts.
Nabi Biopharmaceuticals had been considering a sale, merger or liquidation since November, when its smoking vaccine candidate failed to meet its primary endpoint in its second, pivotal phase 3 trial.
Nabi, which had $96.4 million in assets as of Dec. 31, announced plans Monday to merge with Biota Holdings of Melbourne, Australia. The deal would create a new company, Biota Pharmaceuticals, and require $54 million in cash from Nabi, plus issuance of new stock. It would leave Nabi shareholders owning 26 percent of the new company, with Biota shareholders owning the rest.
The new company’s headquarters would be in the U.S., but officials did not say where.
The deal requires the approval of both companies’ shareholders.
In a Nabi conference call Monday morning, several analysts suggested that stockholders might get more value simply by liquidating Nabi. The company’s liquidation value is about $80 million, according to Nabi CEO Raafat Fahim.
Nabi said it would return to its stockholders its remaining cash in excess of the $54 million, after paying off its debts and other expenses. That would total about $25 million to $30 million, according to Fahim.
Both companies’ stock fell Monday after the announcement, with Biota’s falling 9 percent and Nabi’s down 10.5 percent. Nabi stock closed at $1.66, down from a one-year high of $5.87. By Thursday morning, it was trading at $1.65.
Fahim argued that the deal is in the best interest of both companies’ shareholders and would tie Nabi into Biota’s pipeline.
Biota produces influenza vaccine-related products Relenza, which is licensed to GlaxoSmithKline, and Inavir. The company also has a $231 million contract with the U.S. Biomedical Advanced Research and Development Authority to develop its anti-influenza neuraminidase inhibitor laninamivir in the U.S. Laninamivir already is marketed in Japan.
Nabi’s product development had been focused on the failed NicVax, as well as products for hepatitis and other infectious diseases. Nabi had a 2009 development agreement for NicVax with GlaxoSmithKline of the U.K., worth as much as $500 million. The National Institute on Drug Abuse also had granted Nabi $10 million, including $7.9 million in federal stimulus money, to help develop NicVax.
The deal with Biota “brings in a leading anti-viral program that is well-funded,” Fahim said during Monday’s call. He said Nabi’s directors unanimously have recommended approving the deal.
Shareholders are to vote on it at their next meeting.
Biota sees the deal as a way to access the “larger and deeper” U.S. marketplace, its chairman, Jim Fox, said during his company’s own conference call.
He said the merger is cost-effective and offers a more efficient timetable than any of the more than 40 other companies Biota examined. Biota has been looking to get into the U.S. for a year. The company also plans for a U.S.-based CEO to give it a “direct and more clear connection to the U.S. market,” Fox said.
The new company’s board would comprise two Nabi directors and six Biota directors.
“This is mostly based around the money,” Fox said, referring to the $54 million from Nabi and potential U.S. investors.
The deal is expected to close in the third quarter, if shareholders approve it.
Nabi ended last year with a $4.5 million net loss, versus a profit of $878,000 in 2010. Revenues fell to $14.8 million from $35 million. It had 16 employees as of Dec. 31, according to a regulatory filing.
Biota reported a net loss of $11 million in the first half of its fiscal year, which ends June 30, compared with a net loss of $15.9 million a year earlier. Revenues fell to $7.8 million from $8.1 million.
In other Maryland bioscience industry news:
Human Genome Sciences, which last week rejected an unsolicited $2.59 billion takeover bid by longtime collaborator GlaxoSmithKline, this week reported growing sales of the companies’ new lupus drug in the first quarter.
The Rockville company said first-quarter net sales of Benlysta, which the Food and Drug Administration approved in March 2011, totaled $31.2 million. That was up from $25.7 million in the fourth quarter. Overall sales of Benlysta reached $52.3 million last year.
“A growing body of evidence from our market research indicates that Benlysta is making a difference for patients with systemic lupus — and that rheumatologists who have the most experience with Benlysta are the ones who are most impressed with its efficacy,” CEO H. Thomas Watkins said in a statement. “As lupus-treating physicians gain experience with Benlysta, we believe their use of Benlysta will expand to greater numbers of patients.”
The greater sales boosted the company’s first-quarter revenues to $47.1 million from $26.6 million a year earlier. Besides Benlysta sales, revenues included $6.1 million from sales and deliveries of HGS’s anthrax treatment, raxibacumab, to the U.S. Strategic National Stockpile and $9.1 million recognized from other manufacturing and development services.
The higher revenues, plus lower research and development costs, helped the company narrow its net loss for the quarter to $93.5 million from $131 million in the prior-year quarter.
As of March 31, HGS had cash and investments totaling $798.7 million, down from $881.4 million on Dec. 31.
“Benlysta will continue to be our company’s most important driver of growth for the next several years,” CFO David P. Southwell said in the statement. “Supporting its worldwide commercial progress and further development remain our most important financial priority.”
After doubling in the wake of the spurned GlaxoSmithKline offer — Watkins said bid undervalued his company, even though it was an 81 percent premium on its previous stock price — HGS shares have held steady, as the company explores a sale to Glaxo or another company.
W.R. Grace & Co., the Columbia company best known for manufacturing chemicals and other products for industrial applications, is working with a Belgian pharmaceutical company to develop a new technology for administering drugs.
Grace and Formac Pharmaceuticals reported positive data from initial human studies involving the companies’ mesoporous silica-based drug delivery technology. The system’s goal is to provide a viable new way for developing poorly soluble compounds.
This was the first clinical study to show the bioavailability-enhancing properties of silica in humans, according to a joint statement. The bioavailability profile of fenofibrate formulated with silica was compared with the marketed micronized formulation, called Lipanthyl, which is used to treat high cholesterol; the silica formulation had a 54 percent higher bioavailability.
“The successful completion of this study marks an important milestone for our strategic partnership with Formac as we embark on the development and commercialization of this novel approach for improved drug delivery,” George Young, vice president of new business development at Grace, said in the statement.
Grace and Formac partnered in 2011 to work on the silica-based technology that Formac created. Grace is using its own silica research and development, plus its manufacturing capability, to develop a portfolio of silicas for the initiative.