ViroPharma Incorporated and Lev Pharmaceuticals, Inc. announced that the companies have signed a definitive merger agreement under which ViroPharma will acquire Lev, a biopharmaceutical company focused on developing and commercializing therapeutic products for the treatment of inflammatory diseases, for $442.9 million of upfront consideration, or $2.75 per Lev share, comprised of $2.25 per share in cash and $0.50 per share in ViroPharma common stock (subject to a collar). Contingent consideration of up to $1.00 per share may be paid on achievement of certain regulatory and commercial milestones.
According to a ViroPharma press release, the transaction with a potential net aggregate value of up to $617.5 million has been unanimously approved by the boards of directors of both companies. The companies expect the transaction to be completed by the end of 2008. In addition, concurrently with the execution of the merger agreement, ViroPharma purchased $20 million of Lev common stock.
The acquisition of Lev Pharmaceuticals further enhances ViroPharma's pipeline with Cinryze (C1 inhibitor (human)), which is currently under regulatory review for approval by the US Food and Drug Administration as a replacement therapy for patients with hereditary angioedema (HAE), also known as C1 esterase inhibitor (C1-INH) deficiency. The use of replacement therapy in patients with C1-INH deficiency is supported by more than 35 years of clinical practice experience in Europe. C1-INH depletion is also implicated in a number of other serious inflammatory disorders.
Hereditary angioedema, or C1-INH deficiency, is a dangerous and potentially deadly inflammatory disease affecting up to 10,000 patients in the United States, caused by a genetic deficiency in an essential protein called C1 esterase inhibitor. Clinical studies have shown that prophylactic C1 inhibitor replacement therapy with Cinryze can significantly reduce the severity, duration and frequency of HAE attacks.
"This transaction is consistent with ViroPharma's stated objective of broadening our portfolio of therapies for serious life-threatening conditions in selected specialty markets," commented Vincent Milano, ViroPharma's president and chief executive officer. "Lev's orphan drug Cinryze is a life-saving therapy treating a very dangerous disease. This opportunity provides a clear strategic fit with ViroPharma: Cinryze targets a market that is addressable with modest additional infrastructure and further serves patients suffering from a disease with few treatment options. We are very pleased to add the expertise of Lev to our organization, and Cinryze to our growing portfolio of options for underserved patient populations with critical and urgent needs."
"We believe this transaction recognizes the value we have created at Lev and provides our shareholders with attractive financial terms, through the upfront payment and the opportunity to continue to share in the success of Cinryze through the ownership of ViroPharma shares and the contingent value rights," commented Judson Cooper, Lev's chairman of the board. "Leveraging the combined resources of both companies not only strengthens our C1 inhibitor development platform, but also underscores our commitment to serving patients with critical unmet medical needs."
Under the terms of the merger agreement, ViroPharma will acquire the outstanding common stock of Lev for $2.25 per share in cash and $0.50 per share in stock ("Upfront Consideration"), subject to a collar. The Upfront Consideration value could be lower or higher if the ViroPharma average common share price is lower than $10.03 or higher than $15.68 per share during the twenty trading day period prior to closing. In addition, Lev shareholders will receive the non-transferable contractual right to two contingent payments (CVR Payments) of $0.50 each that could deliver up to an additional $174.6 million, or $1.00 per share in cash, if the company meets certain targets.
The first CVR payment of $0.50 per share would become payable when either (i) Cinryze is approved by the FDA for acute treatment of HAE and the FDA grants orphan exclusivity for Cinryze encompassing the acute treatment of HAE to the exclusion of all other human C1 inhibitor products or, (ii) orphan exclusivity for the acute treatment of HAE has not become effective for any third party's human C1 inhibitor product for two years from the later of the date of closing and the date that orphan exclusivity for Cinryze for the prophylaxis of HAE becomes effective.
The second CVR payment of $0.50 per share would become payable when Cinryze reaches at least $600 million in cumulative net product sales within 10 years of closing. The Upfront Consideration of $2.75 per share and the potential for a total value of $3.75 per share represent premiums of 49% and 103%, respectively, over Lev's closing stock price on July 14, 2008.
Closing is subject to certain conditions including approval under the Hart-Scott-Rodino Act, the approval of Lev's shareholders and other customary closing conditions. Mr. Judson Cooper, Lev's chairman of the board, and Dr. Joshua Schein, Lev's chief executive officer, respectively, and their affiliates, who collectively hold an aggregate of approximately 23% of the outstanding Lev shares, have agreed to vote their shares in favour of the transaction.
Additionally, ViroPharma agreed to make a $20 million investment in Lev, at signing, by purchasing 9,661,836 shares of Lev common stock at a 10 percent premium to the five day average closing price of Lev's shares for the period ending Friday, July 11, 2008, sold pursuant to Lev's effective registration statement on Form S-3.