A complementary combination
Targacept, Catalyst Biosciences agree to merger
WINSTON-SALEM, N.C. & SOUTH SAN FRANCISCO, Calif.—In a move that will create a company with an eye toward engineered human proteases and a focus on bleeding disorders and complement-mediated diseases, Targacept Inc. and Catalyst Biosciences Inc. have entered into a definitive agreement to merge their companies. Per the terms of the deal, the stockholders of Catalyst will initially hold approximately 65 percent of the combined company, which will unite both firms' operations. Targacept cash remaining in the combined entity will be $35 million, along with an expected $5 million cash from Catalyst. Targacept shareholders will retain common stock equal to roughly 35 percent of the combined company and will also receive a dividend of an aggregate of $37 million in non-interest bearing redeemable convertible notes and approximately $20 million in cash. Both companies' boards of directors have unanimously approved the potential merger, which is subject to customary closing conditions, including stockholder approval.
The notes that Targacept shareholders will receive will be convertible into common shares of the combined company's stock within two years after closing, with a conversion price equal to $1.31, representing 130 percent of the negotiated per-share value of Targacept’s assets following the anticipated distribution of the dividend of approximately $20 million in cash and $37 million principal amount of the notes. Should the notes be fully converted, an additional $37 million held in escrow will be made available to the combined unit within the first two years after closing, and on a pro-forma basis, the former Targacept shareholders would hold approximately 49 percent of the merged company's outstanding capital.
“This transaction with Catalyst reflects the continued commitment of Targacept’s Board of Directors and management team to deliver value to Targacept stockholders, and make a difference in patients’ lives,” Dr. Stephen A. Hill, president and CEO of Targacept, noted in a press release. “The proposed transaction employs an innovative structure that is designed to optimize stockholder value for both Catalyst and Targacept. Substantial capital is committed to the combined entity, potential additional capital is earmarked for future investment into the combined company if the notes are converted, and a special dividend is provided for existing Targacept stockholders at the closing.”
Should the deal go through, the combined company will be named Catalyst Biosciences Inc., and Catalyst’s current CEO, Dr. Nassim Usman, will lead the combined company as president and CEO. Other Catalyst executive officers will take their respective positions in the management team of the combined company, with select Targacept executives remaining involved on a transitional basis. The board will feature Catalyst directors Dr. Harold E. Selick, Dr. Jeff Himawan and Augustine Lawlor, and Targacept directors John P. Richard, Dr. Errol B. DeSouza and Hill, with Selick serving as chairman.
“This merger establishes a well-capitalized public company with resources to advance our unique protease-based product candidates through multiple future value inflection points,” said Usman. “In addition to our Factor VIIa program we will also have sufficient resources to initiate and complete a planned proof-of-concept study of CB 2679d, a next-generation Factor IX for hemophilia B patients, as well as further develop of our novel Factor Xa variant and our anti-complement programs.”
The combined company's pipeline will feature several candidates, including PF-05280602, an engineered Factor VIIa drug candidate being developed by Pfizer Inc. under license from Catalyst, and four other promising drug candidates, among them an improved Factor IX for hemophilia B, an engineered Factor Xa that could be indicated for treatment of hemophilia and controlling bleeding in non-hemophilia patients and two novel proteases for the treatment of complement-mediated disorders.
SOURCE: Targacept press release