Alteon Inc. and HaptoGuard, Inc., a privately-held biotechnology company, announced the signing of a definitive merger agreement whereby the two companies will combine operations in a stock transaction valued at $8.8 million. The companies have complementary product platforms in cardiovascular diseases, diabetes and other inflammatory diseases, including two phase 2 clinical-stage compounds focused on cardiovascular diseases in diabetic patients.
In addition, Alteon has signed definitive agreements for an equity financing, which will result in proceeds to Alteon of approximately $2.6 million. The new financing will be used to help fund future clinical development efforts of the combined companies.
Under the terms of the merger agreement, HaptoGuard shareholders will receive approximately 37.4 million shares of ALT common stock (approximately 31 per cent of total shares after completion of the merger.) As part of the merger, a portion of existing shares of Alteon preferred stock held by Genentech, Inc. will be converted into common stock, among other transactions. The merger and stock conversion transactions are subject to the approval of Alteon and HaptoGuard shareholders and are expected to close in the third quarter of 2006.
The PIPE financing includes new and existing institutional investors, in which Alteon will sell approximately 10.3 million Units, consisting of common stock and warrants, for net proceeds after expenses and fees of approximately $2.5 million. Each Unit consists of one share of Alteon common stock and one warrant to purchase one share of Alteon common stock. The Units are being sold at a price of $0.25 per Unit and the warrants are exercisable, commencing 6 months from the date of issuance, for a period of 5 years at an exercise price of $0.30 per share. The shares of common stock and warrants to be offered and sold in the financing have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or state securities laws, and may not be offered or sold in the United States without registration under or exemption from the Securities Act, or any applicable securities laws. The Company has agreed to file a registration statement with the SEC for the resale of the shares of common stock and the shares of common stock underlying the warrants sold in the PIPE transaction. Rodman & Renshaw, LLC served as placement agent in this transaction.
The newly combined company will have two products in phase 2 clinical development: BXT-51072, HaptoGuard's licensed lead compound, is a glutathione peroxidase mimetic in development for reduction of mortality in post- myocardial infarction patients with diabetes. The compound has demonstrated the ability to reduce infarct size by approximately 85 per cent in a mouse model of heart attack called ischemia reperfusion injury. Additionally, HaptoGuard owns a license to a proprietary genetic biomarker that has shown the potential to identify patients who are most responsive to the HaptoGuard compound.
Alagebrium chloride (formally ALT-711), Alteon's lead compound, is an Advanced Glycation End-product Crosslink Breaker being developed for heart failure. Recent data, presented from two Phase 2 clinical studies at the American Heart Association meeting in November 2005, demonstrated the ability of alagebrium to improve overall cardiac function, including measures of diastolic and endothelial function. In these studies, alagebrium also demonstrated the ability to significantly reduce left ventricular mass. The compound has been tested in approximately 1000 patients, which represents a sizeable human safety database, in a number of phase 2 clinical trials.
Key components of the proposed transactions between Alteon, HaptoGuard and stockholder Genentech are as follows:
" Alteon will acquire all outstanding equity of HaptoGuard. In exchange, HaptoGuard shareholders will receive from Alteon $5.3 million in Alteon common stock, or approximately 22.5 million shares.
" Genentech will convert a portion of its existing preferred Alteon stock to Alteon common stock. A portion of Genentech's preferred stock, which when converted to common stock equals approximately $3.5 million in Alteon common stock, will be transferred to HaptoGuard shareholders.
" The remaining Alteon preferred stock held by Genentech will be cancelled.
" Genentech will receive milestone payments and royalties on net sales of alagebrium, as well as a right of first negotiation on BXT-51072.
"We believe that this transaction will truly benefit the shareholders of Alteon by bringing to the Company a promising clinical-stage product, additional proprietary technologies as well as additional management and Board expertise," said Kenneth I. Moch, chairman and CEO of Alteon.
"By combining our operations we will become a new company with a promising product pipeline focused on cardiovascular disease and diabetes," said Noah Berkowitz, M.D., Ph.D., President and CEO of HaptoGuard. "We look forward to potentially initiating new Phase 2 clinical trials for both alagebrium and BXT-51072."
Alteon is a product-based biopharmaceutical company engaged in the development of small molecule drugs to treat and prevent the inflammatory aspects of cardiovascular disease and diabetes. The Company has identified several promising product candidates that it believes represent novel approaches to some of the largest pharmaceutical markets.
HaptoGuard, Inc. is a biopharmaceutical company developing and commercializing therapeutics for inflammatory diseases, particularly those that are present as a consequence of elevated oxidized lipids in the blood. The Company's portfolio includes orally bioavailable, organoselenium mimics of glutathione peroxidase that metabolize lipid peroxides. Its lead compound BXT-51072 is in Phase 2 clinical trials.