Matchmaking in the Midwest

BioSante and ANI Pharmaceutical merge in all-stock deal

Jim Cirigliano
LINCOLNSHIRE, Ill.—BioSantePharmaceuticals and ANI Pharmaceuticals out of Minnesota haveannounced that they plan to merge through an entirely stock-basedtransaction. BioSante will be the surviving company; after themerger, however, the company will be renamed ANI Pharmaceuticals Inc.and will be run by ANI's management team.
 
Prior to the execution of the merger,BioSante will distribute to its current shareholders contingent valuerights that will provide rights to payments on future revenuesderived from the company's female testosterone product, LibiGel.Then, BioSante will issue to ANI stockholders a number of shares ofBioSante stock sufficient to equate to an approximate 53-percentstake in the combined company.

The merged company stands to combineBioSante's cash, expected revenue from licensing deals androyalties and other products in the development pipeline with ANI'sspecialty brand and generic pharmaceutical products, contractmanufacturing operations and positive cash flow.

In December 2011, BioSante announcedthat one of its most promising new products, LibiGel, had missed itsendpoints in Phase III efficacy trials. LibiGel is a femaletestosterone gel intended to treat hypoactive sexual desire disorder,particularly in post-menopausal women. The disappointing results ofthe product's Phase III efficacy trials caused BioSante's stockvalue to plunge to $1.23 by the end of October, down from a 52-weekhigh of $16.56.

In light of this announcement, thecompany evaluated several alternatives for its business and products,including several potential merger candidates, before its board ofdirectors unanimously recommended the merger with ANI.

BioSante's portfolio remainsproduct-rich, however, and includes two U.S. Food and DrugAdministration (FDA)-approved products currently licensed to otherpharmaceutical companies. Jazz Pharmaceuticals markets BioSante'sfirst FDA-approved product, Elestrin—used to treat hot flashes inpostmenopausal women—in the United States, and Teva PharmaceuticalsUSA Inc., has the license to market a testosterone gel for malehypogonadism. The company also has several products in earlier stagesof the development pipeline, including several cancer vaccines inongoing Phase I and Phase II clinical trials and the Pill-Plus, anoral contraceptive in Phase II clinical development by PantarheiBioscience BV.

ANI Pharmaceuticals' targeted areasof product development include narcotics, potent anti-cancer andhormone compounds and niche extended-release generic prescriptionproducts. ANI has a sizeable manufacturing, packaging and laboratorycapacity, including the capability to produce and store products thatmust be manufactured in a fully contained environment due to theirpotency or toxicity. ANI's net sales in 2011 were an estimated $16million.

"We believe that potential futurelicense and other royalty fees due to BioSante for its FDA-approvedmale testosterone gel, licensed to Teva, and other products couldgenerate significant future cash flow for ANI going forward," ANIPresident and CEO Arthur S. Przybyl—who is expected to becomepresident and CEO of the new company—said in an Oct. 4 mediarelease about the merger.

"We found the ANI opportunity to beparticularly compelling for our stockholders since it will combinetwo potentially valuable portfolios of products in development andadd a sales and marketing presence, while preserving for our currentstockholders the right to realize potential future value from LibiGelin the form of contingent value rights of up to $40 million,"BioSante President and CEO Stephen Simes added.

The boards of directors of bothcompanies have approved the merger deal, and the transaction isexpected to close in the first quarter of 2013.

Representatives from both companiesdeclined requests for further comment until after the merger clears ashareholder vote and a Form S-4 registration statement regarding thetransaction is filed with the SEC.

"That document will containadditional information regarding the transaction, BioSante, ANI andthe combined company that will result from the merger," says Simes.

 

Jim Cirigliano

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