Canadian biotechnology company QLT has entered into a definitive agreement to acquire InSite Vision Inc in an all-stock transaction to create an ophthalmic specialty pharmaceutical company with a diversified portfolio of products, full R&D capabilities and innovative platform technologies.
The transaction is expected to drive shareholder value by accelerating both companies’ development pipelines, increasing product diversity and improving balance sheet strength.
The newly formed company will be incorporated in Canada and led by a combined InSite Vision and QLT leadership team. With operations in Alameda, California and Vancouver, British Columbia, and headquarters in Vancouver, the new company will retain the name of QLT and will continue to trade on NASDAQ under the ticker “QLTI” and on the Toronto Stock Exchange (TSX) under the ticker “QLT”.
InSite Vision plans to promptly file a New Drug Application (NDA) later this week with the US Food and Drug Administration (FDA) for marketing approval of its drug candidate BromSite to reduce post-operative inflammation and prevent pain following cataract surgery and continued progression of a phase 3 clinical trial of QLT091001, QLT’s Orphan Drug and FDA Fast Track designated retinoid product candidate for the treatment of inherited retinal diseases in the first half of 2016. The merged companies expect to file a second NDA for InSite Vision’s DexaSite for the treatment of blepharitis in 2016.
The combined company expects to have approximately $70 million in cash after the closing of the transaction and completion of other investments and dividends announced by QLT, all of which dividends will be effected after the completion of the merger and include distributions to prior InSite shareholders as new QLT shareholders.
“The new company created by this merger will be a well-funded pure play ophthalmic specialty company with a robust pipeline of late-stage drug candidates, a strong cash balance with access to a broader investor base and the opportunity for increased shareholder value,” said Timothy Ruane, chief executive officer of InSite Vision.
“The combination of InSite Vision with QLT will create a unique new company with multiple potential value creation events in the near- and medium-term, the potential to file multiple NDAs over the next several years, execute on the development of a potential successful ophthalmic retinoid product and advance a diversified pipeline of promising product candidates for unmet eye care needs.”
“The merger with InSite Vision is an excellent opportunity for QLT shareholders to benefit from the combined strengths and assets of both companies,” said Jason Aryeh, chairman of QLT.
“The InSite Vision team has repeatedly demonstrated its ability to efficiently execute on ophthalmic drug development, and I am excited to see our retinoid product have the opportunity to progress in a similar manner under our combined leadership. With a strong balance sheet and diversified late-stage pipeline, I am excited about the future of the company and its potential for additional value creation.”
Under the terms of the agreement, a wholly owned subsidiary of QLT will be merged with and into InSite Vision. Shareholders of InSite Vision will receive 0.048 QLT shares for each InSite Vision share. For InSite Vision shareholders, the transaction represents a 27 per cent premium based on the closing stock prices of InSite Vision and QLT as of June 5, 2015, the last trading day prior to the announcement of the merger. Upon completion of the merger, QLT shareholders will own approximately 89 per cent and former InSite Vision shareholders will own approximately 11 per cent of the combined company. In addition, the merged company’s board will include two seats to be filled by the chief executive officer of the merged company and one director nominated by InSite.
The transaction, which has been unanimously approved by the Boards of both companies, is subject to the approval of InSite Vision shareholders, a condition that the FDA has not refused to accept the BromSite NDA for review within 60 days after InSite Vision’s filing of the NDA, a condition that the FDA has not indicated that it will require InSite Vision to conduct additional clinical studies prior to approval of BromSite within 74 days after InSite Vision’s filing of the NDA, and other customary closing conditions.
QLT will not require a shareholder vote to conclude the transaction; InSite Vision will file a proxy statement with full disclosure of the transaction and will schedule a shareholder vote to approve the transaction. QLT will provide InSite Vision with a line of credit until the transaction closes. The transaction is expected to close in the third quarter of 2015 and to be taxable to InSite Vision shareholders.
Guggenheim Securities, LLC served as financial advisor to InSite Vision, Roth Capital Partners provided an independent fairness opinion and Jones Day served as legal advisor.
InSite’s DuraSite 2 platform is a proprietary, advanced delivery system designed to extend the residence time of a topically administered therapeutic in ocular tissues located in the front or the back of the eye. DuraSite 2 utilizes polymer-based formulation technology to sustain and enhance ocular delivery in the form of a gel forming suspension that can be customized to deliver a wide variety of potential drug candidates. InSite’s original DuraSite platform technology, which is currently leveraged in two commercial products for the treatment of bacterial eye infections, AzaSite and Besivance, has a proven ability to reduce frequency of treatment and improve efficacy in topical ophthalmic therapy. DuraSite 2 represents the next generation of topical ocular therapy, with improved drug concentration and retention, reduced dosing frequency and the promise of delivering medication to the front or back of the eye via topical administration. The DuraSite 2 technology is patent protected for use in ophthalmic drug development and disease through 2029.
QLT’s synthetic retinoid programme is a replacement for 11-cis-retinal and is being developed for the treatment of retinal diseases caused by gene mutations that interfere with the availability of 11-cis-retinal. It has Orphan Drug designation by both the FDA and EMA for a significant unmet medical need. QLT has conducted safety and proof of concept clinical studies to evaluate its oral synthetic retinoid in patients with Leber Congenital Amaurosis (LCA) or Retinitis Pigmentosa (RP). This innovative ophthalmology programme is ready for phase 3 development. With its orphan drug designation in both the United States and Europe, the synthetic retinoid programme augments InSite Vision’s broad ophthalmology programmes.
InSite Vision is advancing new specialty ophthalmic products for the treatment of diseases affecting the front and back of the eye.