Cytos Biotechnology Ltd. (Cytos), a public biopharmaceutical company, and Kuros Biosurgery Holding AG (Kuros), announced their intention to combine their businesses by way of an exchange of Kuros shares for new Cytos shares, subject to shareholder approval and other customary conditions. Cytos is listed on the main segment of the Swiss stock exchange (SIX Swiss Exchange) while Kuros is a privately-held company based in Zurich. The combined entity will operate under the name "Kuros Biosciences AG" (Kuros Biosciences).
As a result of the combination, the shareholders of Cytos will have ownership in a leading biosciences company in the field of tissue repair and regeneration. The combination has attractive prospects based on a late stage pipeline of products that are targeting a number of key market opportunities, such as sealants and orthobiologics (bone healing).
Kuros' late-stage pipeline has already generated highly encouraging data in multiple clinical studies: Kuros' most advanced product candidate is KUR-023, a novel biomaterial designed to seal the dura (membrane covering the brain and spinal cord) after brain and spinal surgery that has successfully completed a European clinical study and is being prepared to be CE Marked in preparation for commercial launch; KUR-111 and KUR-113, Kuros' most advanced orthobiologic products, have most recently been successfully tested in large, controlled phase 2b clinical trials and are now progressing towards phase 3 clinical development.
In addition to this attractive clinical pipeline, the combined company will have several product candidates in pre-clinical development. Kuros Biosciences will continue all partnerships Cytos has entered into, in particular the two collaborations for CYT003 and the VLP technology with Checkmate Pharmaceuticals in Cambridge, MA, USA, for the treatment of cancer and with Arbutus Biopharma in Burnaby, British Columbia, Canada (formerly Oncore Pharmaceuticals), for the treatment of hepatitis B infections. With those two collaborations, the CYT003 program and VLP technology will move forward with investment from the collaboration partners and, if successful, Kuros Biosciences will be eligible for significant development milestone payments and royalties on future sales.
The combined company will be led by the existing Kuros executive management team with Kuros' CEO, Didier Cowling, taking the role of new group CEO, Alistair Irvine as chief business officer and Jason Schense as chief technology officer. All current members of the Cytos management staff will cease their executive roles when the combination is completed. At a shareholders' meeting of Cytos scheduled to take place in January 2016, Cytos' current CEO and chairman, Christian Itin, will remain as chairman of the board of Kuros Biosciences and Harry Welten, Cytos CFO, will be proposed for election as a non-executive Board member. Following the combination, and subject to their election, the Board of Kuros Biosciences will consist of Christian Itin (chairman), Dominik Ellenrieder (vice chairman), Didier Cowling, Harry Welten, Arnd Kaltofen, Jörg Neermann, Gerhard Ries and Vincent Ossipow.
Christian Itin, chairman of Cytos' board of directors, stated: "Following a thorough strategic review, Cytos' Board and management have concluded that a combination with Kuros is the most promising option for Cytos to establish a business with the potential to create long-term value for Cytos' shareholders. We are confident that the proposed combination is in the best interest of Cytos shareholders."
Arnd Kaltofen, Chairman of Kuros' board of directors, added: "Going public was the next logical step in developing Kuros into a leading player in its business segment. The planned combination will allow Kuros not only to access the Swiss public market smoothly, but also add significant Board expertise and further revenue potential through Cytos' existing licensing deals."
Didier Cowling, CEO of Kuros, commented on the proposed transaction: "Kuros has built a diversified and clinically tested product pipeline with significant revenue potential in attractive markets. The support that we are receiving from our shareholders in the proposed transaction confirms our confidence in our product candidates, business model and management team. The proposed combination with Cytos gives us access to the public capital markets and thereby achieves a key step in Kuros' development."
Under the terms of the proposed combination, each Kuros share outstanding will convert into approximately 27 newly issued Cytos shares. In addition, existing options and conversion rights for Kuros shares are expected to be rolled over into comparable rights for Cytos shares. Following closing, the current shareholders of Cytos will own approximately one-fifth and Kuros' shareholders will hold approximately four-fifths of the outstanding shares of the combined company. In addition, existing options and warrants for Cytos shares and roll-over options and conversion rights replacing rights for Kuros shares are expected to make up a total of approximately 15.5% of the outstanding share capital of the combined company post-closing. Options and warrants of around 8.6% of the outstanding share capital post-closing are expected to be in the money at closing.
The companies have undertaken reciprocal due diligence providing the basis for recommending the intended transaction to their respective shareholders. Closing of the transaction is expected within two months and is contingent upon certain conditions, amongst others a vote of approval by Cytos' current shareholders and the listing of the new Cytos shares.
At the extraordinary shareholders' meeting of Cytos, planned for January 2016, the Cytos Board proposes to its shareholders to issue around 392 million new shares to the Kuros shareholders. Furthermore the roll-over of options and warrants granted by Kuros will require an increase of the conditional capital of Cytos by around 50 million shares and of the authorized share capital by around 9 million shares. The Board also proposes at this extraordinary shareholders' meeting the election of new members of the Board and certain other resolutions, such as the change of name of Cytos to Kuros Biosciences AG.
Kuros Biosurgery Holding AG is a privately held company focused on the development of innovative products for tissue repair and regeneration.