Sector News

Targacept and Catalyst Biosciences Enter Definitive Merger Agreement

March 6, 2015
Life sciences
(BUSINESS WIRE) – Targacept, Inc. and Catalyst Biosciences, Inc., a privately held biopharmaceutical company, jointly announced today that they have entered into a definitive agreement to merge the two companies. The combined entity, to be named Catalyst Biosciences, Inc., is expected to create a financially strong company to harness the catalytic power of engineered human proteases to develop next-generation biopharmaceuticals with improved efficacy and therapeutic index to treat major diseases.
 
“This merger establishes a well-capitalized public company with resources to advance our unique protease-based product candidates through multiple future value inflection points”
 
The combined company, with an anticipated NASDAQ listing with the symbol CBIO, will have:
 
  • A pipeline of protease therapeutics including PF-05280602 (formerly CB 813d), an engineered Factor VIIa (FVIIa) drug candidate that successfully completed a Phase 1 clinical trial and is being developed by Pfizer Inc. under license from Catalyst. PF-05280602 is designed to address an established approximately $1.5 billion hemophilia market by potentially enabling lower and fewer doses of an engineered Factor VIIa to control bleeding episodes and to potentially achieve effective prophylaxis in hemophilia inhibitor patients;
  • Four additional promising drug candidates including: an improved Factor IX (FIX) for hemophilia B, an engineered Factor Xa (FXa) that can potentially be used for both hemophilia and the control of bleeding in non-hemophilia patients, and two novel proteases for the treatment of complement-mediated disorders;
  • News flow from drug development programs including Phase 1 data from the Pfizer-sponsored Factor VIIa program in severe hemophilia A & B and inhibitor patients;
  • Immediate committed capital to the combined entity expected to include cash and cash equivalents of approximately $40 million at the closing of the transaction; and
  • For existing Targacept shareholders, a special dividend prior to closing of approximately $20 million in cash and redeemable convertible notes with an aggregate principal amount of $37 million, which provides the potential for future capital investment in the company.
 
“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 Nassim Usman, Ph.D., Chief Executive Officer of Catalyst. “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.”
 
As part of the proposed transaction, the stockholders of Catalyst will initially own approximately 65 percent of the combined company, and the operations of both companies will be combined. Targacept cash remaining in the combined company will be $35 million, along with an anticipated $5 million of cash from Catalyst. In addition to retaining common stock representing approximately 35 percent of the combined company, current Targacept stockholders will receive a dividend of an aggregate of $37 million in non-interest bearing redeemable convertible notes and approximately $20 million in cash. The notes will be convertible into the combined company’s common stock at any time within two years after closing at the noteholders’ discretion. The conversion price of the notes is equal to $1.31, which represents 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. The conversion price is subject to adjustment in the event of a reverse stock split of the combined company’s common stock. The combined company will establish an escrow fund of cash sufficient for repayment of any notes that are not converted to stock during the two-year conversion period. If the redeemable convertible notes are fully converted, an additional $37 million held in escrow would be made available to the combined company within the first two years following closing, and on a pro-forma basis as of the anticipated closing date, the former Targacept stockholders would own approximately 49 percent of the outstanding capital of the combined company. The initial ownership percentages are subject to adjustment based on Catalyst’s cash balance at closing.
 
“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,” said Dr. Stephen A. Hill, President and Chief Executive Officer of Targacept. “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.”
 
The boards of directors of both companies have unanimously approved the proposed merger, which is subject to customary closing conditions, including approval by the stockholders of each of Targacept and Catalyst. Voting agreements supporting the transaction have been signed by shareholders representing approximately 43 percent of Targacept’s common stock and 84 percent of Catalyst’s voting stock.

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