DUNDEE, Scotland—Cyclacel Group and Seattle-based Xcyte Therapies announced recently the signing of a definitive agreement to merge the two companies into a publicly-traded international biopharmaceutical company called Cyclacel Pharmaceuticals. The deal largely revolves around the acquisition by Xcyte of all capital stock of Cyclacel Ltd., a wholly-owned subsidiary of Cyclacel Group.
According to Spiro Rombotis, Cyclacel CEO, the deal will result in an 80:20 split of the new company's common stock ownership for Cyclacel and Xcyte, respectively. "In a reverse merger of this type, it is hard to extrapolate the new company's value from Xcyte's valuation on the day of the announcement, as that reflects Xcyte's diminishing product prospects at the time," he says. "Indeed, Xcyte's valuation has doubled since the announcement."
The move coincides with Xcyte's announcement that it had sold its Xcellerate technology platform to Invitrogen following on its July 2005 decision to identify and explore other strategic options. In the announcement of the July decision, Dr. Christopher Henney, chairman of Xcyte's board of directors, said: "We intend to explore all options to maximize shareholder value. These options include mergers, acquisitions, sale or purchase of assets, in-licensing opportunities, and out-licensing certain of our assets. While this process is ongoing, we intend to reduce the operating expenses of the company as much as possible, consistent with maintaining the value of our assets."
According to Rombotis, who will become CEO of the new company, following discontinuation of their in-house programs, Xcyte looked to invest its cash in a private biotech small molecule oncology business, screening about 50 companies before deciding to proceed with Cyclacel.
Xcyte officials were unavailable for comment on the current deal; however, Henney stated in the current announcement: "We are enthusiastic about the combination with Cyclacel because we believe that the strength and competitive position of the new company offer our shareholders the opportunity to participate in the development and exploitation of a portfolio of product candidates with significant market potential. When we announced earlier this year our intention to pursue strategic alternatives, this was the type of transaction we hoped to be able to offer our shareholders."
For Cyclacel, the deal revolved around a question of access. "U.S. capital markets such as NASDAQ are probably the most demanding but also the most resilient fundraising mechanisms globally for biotech companies," says Rombotis. "Non-U.S. biotechs with world-leading science and integrated business models need to be competitive with their U.S. peer group. Access to U.S. capital markets appears to be very important if they are to achieve a level playing field."
The new company will be headquartered in New Jersey, where its medical team is already located, he adds, while it will maintain existing research and preclinical facilities in the United Kingdom. With the exception of Henney, who will continue as a board member, no Xcyte staff will transfer to Cyclacel Pharmaceuticals and the current Seattle facilities will be shuttered.