Tekmira Pharmaceuticals Corporation and Protiva Biotherapeutics Inc. have signed a share purchase agreement under which the two Vancouver-based companies would combine their businesses by Tekmira purchasing the outstanding equity of privately owned Protiva. The combined company, which will retain the name Tekmira, will be a global leader in the development of novel delivery technology and nucleic acid drugs, including RNA interference (RNAi) therapeutics.
As part of the transaction, Alnylam Pharmaceuticals, Inc. and the Roche Venture Fund will each invest $5.0 million in Tekmira at a price of $2.40 per Tekmira share. At close, the new Tekmira is expected to have greater than $35 million in cash and equivalents.
Tekmira will purchase all of the outstanding equity of Protiva by issuing 22.8 million shares and reserving 1.8 million shares for the exercise of Protiva stock options. Upon completion of the transaction, Protiva will become a wholly owned subsidiary of Tekmira. Tekmira currently has 24.6 million shares outstanding. As part of the transaction, upon closing, Alnylam and Roche will each invest $5 million for an aggregate investment of $10 million of Tekmira equity at a price of $2.40 per share. Upon close, Tekmira is expected to have 51.6 million shares outstanding and 5.4 million options outstanding: current Tekmira shareholders will own 48 per cent of the combined company with Protiva shareholders owning 44 per cent and Roche and Alnylam owning 4 per cent each. The company will continue to trade on the Toronto Stock Exchange under the symbol "TKM".
The combined company would advance a pipeline of novel therapeutic products based on technologies and intellectual property contributed from both Tekmira and Protiva that covers a variety of lipid formulations for the delivery of nucleic acids. The new Tekmira will have rights to develop seven RNAi therapeutic products based on access to Alnylam's intellectual property. The new Tekmira expects to advance two systemic RNAi therapeutics into clinical development over the next 12-18 months as treatments for hypercholesterolemia and cancer.
In the field of RNAi therapeutics, the new Tekmira will have licensing and other relationships with Alnylam, Roche, Regulus Therapeutics, a joint venture between Alnylam and Isis Pharmaceuticals, Inc. and Merck & Co., Inc. Each of these companies has licensed either Tekmira's or Protiva's technology and the combined company is eligible to receive milestone and royalty payments.
RNAi drugs have the potential to treat human diseases by "switching-off" genes that cause disease. The technology represents one of the most promising and rapidly advancing frontiers in biology and drug discovery - and was awarded the 2006 Nobel Prize for Physiology or Medicine.
The transaction, which has been unanimously approved by the board of directors of each of Protiva and Tekmira, will end all litigation between the two companies and their directors and officers. This includes all actions concerning contractual issues and rights to intellectual property surrounding the lipid delivery of siRNA.
The new board of directors will be comprised of four members from each company. Tekmira director K. Michael Forrest will become the chairman of the board of directors of the combined company.
The new Tekmira management will be led by Dr. Mark J. Murray as president and CEO, currently Protiva's chairman, president and CEO; Ian Mortimer as executive vice president and chief financial officer, currently chief financial officer of Tekmira; and Dr. Ian MacLachlan as executive vice president and chief scientific officer, currently chief scientific officer of Protiva. Timothy M. Ruane, Tekmira's current president and CEO, will resign upon the closing of the transaction but will continue to provide consulting services to Tekmira.
Ruane said, "The new Tekmira will create greater value for the shareholders of both Tekmira and Protiva than either company could achieve on its own. Protiva's progress in the field of RNAi therapeutics has attracted impressive partners and has led to the development of innovative products. The combined company will have a strong competitive position and a deep pipeline of product candidates".
The business combination will require Tekmira shareholder approval. Tekmira's annual general meeting and special shareholder meeting to approve the transaction will take place in late May 2008, with closing of the transaction to occur shortly thereafter.
"This transaction will position the new Tekmira at the forefront of a new generation of RNAi drugs entering human clinical trials that are capable of fighting serious and life threatening diseases. We see a great opportunity to build significant long-term shareholder value and establish Tekmira as a global leader in the development of RNAi therapeutics. The potential of the combined company is a strong reflection of the outstanding capabilities of the employees of both companies. I look forward to bringing our teams together to create a successful company," said, Dr Murray.
At December 31, 2007 Tekmira had cash and equivalents of $20.9 million and Protiva had cash, short term investments and a cash investment tax receivable totalling $15.0 million. With the $10 million equity investment from Alnylam and Roche, the merged company is expected to have cash and equivalents of greater than $35 million at the close of the transaction in late May 2008.
The combined company is estimated to have sufficient financial resources to fund the company's development plan for greater than 24 months.
The closing of the transaction is subject to a number of customary conditions, including, without limitation, the approval of Tekmira shareholders and the Toronto Stock Exchange, the completion of one or more equity offerings totalling at least $10 million with Alnylam, Roche or other persons, the completion of license and related agreements with Alnylam and Roche, the extinguishment of the current US$5 million loan facility made available by Alnylam to Tekmira, and the receipt of all required third party consents.
Tekmira has ongoing product development partnerships with Alnylam, Hana Biosciences Inc. and Aradigm Corporation.
Protiva has ongoing strategic partnerships or license agreements with Alnylam and Merck and Protiva's technology is currently being evaluated by four other pharmaceutical companies through research agreements.
The new Tekmira will have a broad relationship with Alnylam whereby Alnylam has access to Tekmira's and Protiva's technology for the delivery of RNAi therapeutics. The combined company will be eligible to receive up to US$16 million in milestones on each and every RNAi therapeutic advanced by Alnylam or its partners, including Roche, that utilizes the new company's technology, as well as royalties on product sales. Another feature of the partnership with Alnylam is a license enabling Tekmira to develop seven siRNA drugs that use Alnylam's leading and broad intellectual property with respect to RNAi technology, subject to Alnylam's consent and any required consent from third parties. Tekmira will continue to provide research and development and manufacturing services to Alnylam.
Alnylam will also provide Regulus access to Tekmira's and Protiva's technology, and the combined company will be eligible to receive milestones and royalties on products advanced by Regulus that utilize the new company's technology. Regulus is a joint venture between Alnylam and Isis that is focusing on the discovery, development and commercialization of microRNA therapeutics.
As part of the transaction, Roche will enter into research and development agreements with both Tekmira and Protiva and Roche will have full access to all of Tekmira's and Protiva's intellectual property through Alnylam. The combined company will also be eligible to receive milestones on each and every RNAi therapeutic advanced by Roche that utilizes the new company's technology, as well as royalties on product sales.
The combined company will also have a license agreement with Merck whereby Merck has non-exclusive access to Protiva's technology for the development of RNAi therapeutics. Under the terms of the agreement, Merck will pay up to US$17 million in milestones plus royalties based on the development of RNAi-based product candidates that utilize Protiva's technology.
Tekmira also has license agreements with Hana Biosciences and Aradigm under which these companies can develop products based on Tekmira's technology. These companies are paying for 100 per cent of all development costs and Tekmira is eligible to receive milestone payments based on progress and royalties based on sales.
The most advanced partnership is with Hana Biosciences covering the development and commercialization of three of Tekmira's targeted chemotherapy products - Marqibo (vincristine sulfate liposomes injection), now in phase II clinical trials as a treatment for adult patients with relapsed acute lymphoblastic leukaemia; Alocrest, now in phase I clinical trials as a treatment for refractory solid tumours; and Brakiva, which is expected to enter a phase I clinical trial in 2008.