Pharmos Corporation has entered into a definitive agreement to acquire Vela Pharmaceuticals Inc., a venture-capital backed, privately owned company specializing in the development of medicines related to diseases of the nervous system including disorders of the "brain-gut axis."
The transaction includes an initial payment of $5.0 million in cash and the issuance of 11.5 million shares of Pharmos common stock for a combined value of approximately $29.7 million (based on Pharmos' recent $2.15 per share closing stock price). The transaction also includes the issuance of up to 8.0 million additional Pharmos shares contingent on achieving specific clinical milestones.
According to the company release, the transaction will create a combined company focused primarily on diseases of the nervous system and autoimmune disorders. Pharmos' assets include over $45 million in cash (based on Pharmos' cash on hand as of December 31, 2005) and a strong drug development pipeline. The most advanced drug in clinical development in the combined company's pipeline will be Vela's R-tofisopam, a promising and innovative new drug that has demonstrated positive Phase 2 data for the treatment of diarrhoea-predominant and alternating-type irritable bowel syndrome (IBS).
Overall, IBS accounts for approximately 12% of all visits to primary care physicians in the US and is the second most common disease treated by gastroenterologists. In addition, IBS-associated health care costs are in the range of $20-$25 billion annually. Scientists at Vela believe R-tofisopam targets IBS symptoms by acting upon the "brain-gut axis" rather than 5-HT3 and 5-HT4 receptors found within the gastrointestinal (GI) tract. In addition, R-tofisopam has been found to have anti-inflammatory properties that are being evaluated pre-clinically.
The Pharmos clinical pipeline will also include cannabinor, a promising drug candidate for the treatment of pain, inflammation and autoimmune disease. Cannabinor successfully completed a Phase 1 trial in January 2006 and is scheduled to initiate a Phase 2a trial in the second quarter of 2006. The Pharmos combined preclinical pipeline will continue to be driven by its industry-leading cannabinoid type two (CB2) receptor agonist platform with additional leading cannabinoid type one (CB1) receptor and CB2 receptor agonists and antagonists showing promise for a variety of significant indications.
Haim Aviv, Chairman and CEO of Pharmos, said, "We are pleased to announce this significant acquisition that will provide Pharmos with a later clinical stage drug. Our criteria and process for screening were rigorous, and after reviewing numerous candidates, we believe that Vela is an excellent strategic and scientific fit for Pharmos. Specifically, the Vela pipeline extends our presence in the specialty nervous system arena and expands our CNS focus with additional disease targets. We believe potential FDA approvals of cannabinoid-based products in obesity will further highlight the emerging cannabinoid class of therapies and will serve to spotlight Pharmos as a leader in this exciting new area."
Dr. Aviv continued, "This acquisition also strengthens our management team and expands our expertise. We are delighted to welcome seasoned new members to the Pharmos board of directors who will bring exceptionally strong expertise in science, business, and management along with key Vela executives that will complement and strengthen our existing team. Finally, we believe that this transaction is a transforming event and a key platform to build shareholder value for Pharmos and will increase the versatility of our opportunities."