Peptech and Evogenix Merge to Form Antibody Powerhouse
May 7, 2007-Peptech Limited (ASX: PTD, AIM: PTDx) and antibody
therapeutics company, EvoGenix Limited (ASX: EGX), today announced
plans to merge, to form one of Australia’s largest
biotechnology companies and a company poised to become a high
profile player in the world wide antibody and protein therapeutics
sector. The merger represents a major milestone for both companies
and a key landmark for the Australian biotechnology industry in
developing a world class company of scale.
The vision for the new company will entail a demonstrable pathway for rapid growth, as the high potential antibody products in the combined pipeline progress through successful testing in patients. The focus of the company is on developing significant antibody/protein based franchises for the treatment of inflammatory diseases, bone disease and cancer. Each of these therapeutic areas represent substantial opportunities with successful antibody based products achieving record sales growth in recent years to levels in excess of a billion dollars annually.
The merged company will be led by Peptech CEO, Dr John Chiplin, and a board made up of directors from both companies. A combined management team with a strong record of achievement in the sector will drive the future growth of the company. Dr Merilyn Sleigh, EvoGenix CEO, will be retained in a senior advisory role. The combined company will be renamed.
The merged entity will have an exceptionally strong balance sheet. Peptech has substantial cash to fast track product development, having earlier this year received more than $150 (US$130) million from the sale of its share in UK company Domantis Limited to GlaxoSmithKline. In addition the combined company receives on-going revenue streams from Abbott and Johnson & Johnson in relation to blockbuster antibody, anti-TNF drugs Humira® and Remicade®. Peptech’s own “next generation” anti-TNF drug will enter the clinic this month.
Consistent with the recently announced set of strategic options facing the company, the Peptech Board is confident that this transaction will add significantly to shareholder value.
Dr John Chiplin, CEO of Peptech, commented: “Consistent
with our previously announced strategy, this transaction creates a
combined entity which is poised to be a major player on the
world-wide antibody stage. We have genuinely built critical mass in
this Australian merger to compete aggressively in the fastest
growing sector of the international human therapeutic
market.” He further noted, “EvoGenix and Peptech are an
excellent strategic fit at all levels. EvoGenix has
revenue-generating technology with proven capabilities and linkages
that blend ideally with our own product development activities, to
deliver more rapid company growth and delivery of products to the
EvoGenix’s CEO, Dr Merilyn Sleigh, stated: “We believe that this merger will be a truly transforming transaction for both companies. The products, technology and capital assets of the new company, will be combined with strong capabilities and critical mass across all levels of its operation. This is a unique opportunity for EvoGenix to step up to the next stage of its development, continuing its rapid growth profile but within a larger group with complementary skills and assets.”
The transaction in detail:
The acquisition is to be implemented through a scheme of arrangement between EvoGenix and its shareholders (Scheme). Peptech will acquire 100% of the issued shares in EvoGenix for cash and shares totaling $1.12 per share, based on the closing price of Peptech on Friday 4 May. Under terms of the Merger Implementation Agreement (MIA), Peptech will offer 15 cents cash plus 0.5055 Peptech shares for each EvoGenix share on issue. This values EvoGenix at approximately $156 million and represents a 33% premium to EvoGenix’s last traded price on the ASX on 4 May, 2007 of 84.5 cents and a 39% premium to its 30 day volume average weighted price.
Dr John Chiplin will be the CEO and Mel Bridges will be Chairman of the merged entity. EvoGenix’s Chairman, Chris Harris, and a non-executive director, Robin Beaumont, will join a restructured Peptech board on completion of the proposed transaction. The management and scientific staff of EvoGenix will continue within the merged company, with current CEO, Dr Merilyn Sleigh, being retained in an advisory role.
The merger is subject to EvoGenix shareholder approval and a review by an independent expert. The EvoGenix Board of Directors unanimously recommend shareholders accept and vote in favour of the Scheme and confirm it is in the interest of EvoGenix shareholders in the absence of a superior offer. In addition the directors of EvoGenix intend to vote all of the shares they hold directly in favour of the Share Scheme.
Start-up Australia Ventures Pty Limited (SUAV), which holds 30.5% of EvoGenix shares, has committed to voting 19.9% of EvoGenix shares in favour of the Scheme through a voting agreement with Peptech, in the absence of a proposal valuing the company in excess of 115% of the consideration payable by Peptech. 19.9% is the maximum number of shares Peptech is allowed by law to control at this time. SUAV was the founding investor in EvoGenix in 2001, when the company was formed to develop technology derived from the Cooperative Research Centre for Diagnostics, and CSIRO.
Peptech and EvoGenix have entered into an MIA which provides the framework for implementing the proposed Share Scheme. The key terms and conditions of the MIA are summarised in the Appendix.
An Explanatory Booklet with full details of the proposed transactions, including an
Independent Expert’s Report, is expected to be dispatched to EvoGenix shareholders in June 2007. The meeting to approve the Scheme is expected to be held in August.A more detailed timetable for the approval and implementation of the proposed transaction will be announced in due course.
Background to the merger:
Peptech was formed in 1985 and listed on the ASX in 1986. Peptech has a proven track record in commercialising its assets, realising over $300 million in revenues over the last six years. It has substantial on-going revenue streams from its licensing agreements with Abbott and Centocor, a subsidiary of Johnson & Johnson. It is dedicated to developing and providing antibody and peptide-based human therapeutic products for the treatment of cancer and inflammatory diseases. It is transitioning to a mid-stage development company as several of its products move from preclinical development into human trials, starting with the Company’s lead product, PN0621, a differentiated anti-TNF compound based on a domain antibody. In addition to its ASX listing Peptech is listed on AIM (PTDx). Peptech recently announced a substantial ($6.6 million) grant from the Australian government under the government’s Pharmaceuticals Partnerships Program to be used towards the R & D costs that will be incurred over the next two years.
EvoGenix was formed in 2001, acquired US company Absalus Inc in 2005 and listed on the ASX in the same year. EvoGenix has operations in Australia and the USA, and focuses on developing antibody therapeutics. Through the 2005 acquisition, it consolidated a powerful technology platform for converting research stage antibodies into products suitable for human testing. Based on its technology capabilities it has established collaborations with GlaxoSmithKline, CSL and Australian company Vegenics. These agreements generate immediate revenues and a long-term interest in products being developed through milestone and royalty payments. GSK recently confirmed successful delivery on the first project carried out by EvoGenix under their collaboration agreement. EvoGenix has also used its technology strengths to access and develop a number of internally-owned products in the areas of cancer, bone loss and respiratory infection. Its general intention is to out-license these products at an early stage to meet strategic opportunities in the sector, with selected products advanced internally through clinical testing. The first such product is due to commence development for the clinic at the end of 2007.
A focus on the antibody sector positions the new company in what is currently the most dynamic area of the pharmaceutical industry. Antibodies have already proved their value in opening up entirely new avenues for treatment in cancer and inflammatory diseases like arthritis. Many antibody products reaching the market have gone on to achieve blockbuster status – sales of greater than US$1 billion annually. More than 50% of the growth in all drug sales over the next 5 years is expected to come from new and existing antibody products. Antibodies have finally delivered on their promise as “magic bullets” and the new company is poised to be an international leader in the field.
Peptech’s lead compound, PN0621, is expected to commence clinical testing in this quarter, with a further two products from the EvoGenix pipeline ready for clinical development next year. With these key projects progressing through clinical development, a continuation of the EvoGenix technology collaboration strategy and a portfolio of emerging products, the new company has an outstanding platform from which to deliver increasing shareholder value in the short and long term.Citigroup are financial advisors to Peptech and ABN AMRO Morgans are financial advisors to EvoGenix.Peptech and EvoGenix will file a detailed investor presentation with the ASX, which can be viewed on the company websites.
Posted: May 2007