Micrologix to acquire San Diego-based MitoKor

San DiegoMonday, April 19, 2004, 08:00 Hrs  [IST]

Micrologix Biotech Inc. (Micrologix) has entered into a definitive agreement to acquire San Diego-based MitoKor, Inc. (MitoKor), a privately held biotechnology company focused on the research and development of drugs for the treatment of major medical conditions related to mitochondrial dysfunction, with clinical and preclinical product candidates in Alzheimer's, arthritis, Parkinson's, and other diseases. Strategic and Business Rationale: Transformational acquisition broadens therapeutic focus and leverages product development and business development strengths to unlock value. Together, Micrologix and MitoKor have: 2 candidates in or entering Phase III clinical development (both in active partnering discussions); 3 candidates in Phase I/II development; 7 programs in preclinical development; a strong history of corporate agreements with major biotechnology and pharmaceutical companies including MitoKor's current agreements with Pfizer and Wyeth Jim DeMesa, M.D., who will lead the combined company as president & CEO, stated, "We have built an outstanding leadership and product development team at Micrologix, and have executed on our strategy to create a broad anti-infective product portfolio with clinical and preclinical programs in hepatitis, acne, catheter-related infections, and hospital-acquired infections. Adding MitoKor's clinical and preclinical product candidates for neurological, metabolic, and degenerative diseases, broadens our therapeutic focus and increases our commercial opportunities. This major step in our transformation, combined with our strengths in product and business development, further fuels our business model for value creation. Furthermore, establishing a San Diego (U.S.) operation gives us a presence in another leading North American biotechnology hub, which we expect can provide additional strategic advantages going forward." Walter Moos, Ph.D., chairman & CEO of MitoKor, added, "Based on over 20 years of experience in the pharmaceutical and biotech industries, and having led MitoKor for the past seven years, I am very confident in the therapeutic and economic potential of our technology and am committed to working closely with the Micrologix team to help unlock significant value." MitoKor has built a solid scientific and intellectual property portfolio related to mitochondrial dysfunction. These advances have resulted in the following product development programs at MitoKor: § MITO-4509 (Alzheimer's disease): an orally-administered drug candidate which has demonstrated neuro-protective activity and reductions in beta-amyloid in animal models of Alzheimer's disease, and was well tolerated in a completed human Phase I trial. Planning is underway to advance this drug into Phase II clinical development within 12 months. In addition to Alzheimer's disease, MITO-4509 has shown potential for use in Parkinson's disease, Friedreich's ataxia, retinitis pigmentosa, and mild cognitive impairment ("MCI" is often considered a precursor to Alzheimer's disease). Sanjay Asthana, M.D., associate director of the Wisconsin Alzheimer's Institute, Section Head of Geriatrics and Gerontology, and a recognized clinical expert in neurological disease drug development stated, "MITO-4509 could be a potential therapeutic breakthrough for the large number of people expected to develop Alzheimer's disease and other major conditions associated with mitochondrial dysfunction in the future." § MITO-4565 (Glaucoma): a small molecule in preclinical testing which has demonstrated potent activity in blocking the apoptotic cell death pathways that underlie retinal degeneration. With its neuro-protective mechanism of action, MITO-4565 also has potential for Alzheimer's disease, MCI, and Parkinson's disease. § MITO-4042 (Arthritis): a small organic molecule that has demonstrated the ability to improve function in cartilage and chondrocytes in preclinical models. § In addition to these drug candidates, MitoKor has identified lead candidates for the treatment of obesity and ischemia reperfusion injury of the heart and central nervous system (CNS). In aggregate, MitoKor owns or has exclusive licenses to more than 30 issued U.S. patents and over 25 pending U.S. applications, as well as over 100 foreign counterparts and applications. Micrologix will issue approximately 5.5 million common shares as upfront consideration to acquire MitoKor and 4 million Series E preferred shares for potential future milestone payments, the latter of which represents up to US$4 million in stock and/or cash upon the achievement of certain product development or other milestones related to the MitoKor portfolio. The transaction, anticipated to close in June 2004, is subject to a California fairness hearing, the approval of MitoKor's shareholders, and other customary conditions such as regulatory approval. The current Board of Directors of Micrologix will serve as the Board of the new combined company, with some restructuring anticipated after closing, including the addition of Walter Moos as a new director. As part of the transaction, Micrologix intends to maintain a portion of the MitoKor facility in San Diego. Three senior members of the MitoKor corporate and scientific management team have entered into consulting and/or employment agreements with Micrologix, including: Walter Moos, Ph.D., chairman & CEO of MitoKor, who will work closely with Dr. DeMesa on integration and management, Neil Howell, Ph.D., VP Research, and Jim Dykens, Ph.D., Director of Drug and Business Development. With continued cost management, it is anticipated that the burn rate guidance of $9-$12 million for Micrologix will increase to $10-$13 million annually for the combined company going forward. With an estimated combined $23 million in cash, sufficient capital for approximately two years of operation will be maintained. Upon closing of the transaction, MitoKor will merge with MBI Acquisition Corp. an indirect wholly-owned subsidiary of Micrologix, incorporated in Delaware. Micrologix will continue to trade on the Toronto Stock Exchange under the ticker "MBI" and over-the-counter in the U.S. under the symbol "MGIXF" until a new name is selected to more accurately reflect the transformation into a diversified biopharmaceutical company. MitoKor has attracted many top-tier investors and strategic partners, with shareholders including Alta Partners, Domain Associates/3i Biotechnology Investment Trust, Forward Ventures, MDS Capital Corp., Chiron, Pfizer, and others. Agreements supporting the transaction have been executed by a number of MitoKor's major shareholders. Vengate Capital acted as an advisor to Micrologix and Legg Mason Wood Walker, Incorporated acted as advisor to MitoKor for the purposes of this transaction. Mitochondria are present in nearly all animal and plant cells and are essential to human life. Mitochondrial dysfunction is a significant contributing factor in the pathophysiology of over 75 diseases, including Alzheimer's and Parkinson's diseases, arthritis, stroke, and others.