Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) and Clal Biotechnology Industries Ltd. (TASE: CBI) have rewritten their investment agreement in Andromeda Biotech Ltd.
Andromeda is developing DiaPep277, a synthetic peptide immunomodulator, for the treatment of type 1 diabetes. The Phase III trial is being conducted in Europe, and the interim results are due in early 2008.
Originally, Teva had an option to acquired full ownership of Andromeda from Clal Biotechnology after the interim results of Phase III clinical trial of the company's diabetes drug were obtained. Teva would have paid several tens of millions of dollars plus single-digit royalties.
Under the new agreement, Clal Biotechnology will continue to own the controlling stake in Andromeda and will also finance further trials and regulatory procedures. Teva will receive a marketing license for the drug in exchange for a smaller investment. Teva's total investment will still exceed $100 million, made in several tranches, and it will pay Clal Biotechnology higher royalties.
Within two months after the interim results are obtained, Teva may invest $21 million in Andromeda at a company value of $90 million. Teva will not investment the entire amount, but will participate in a financing round with institutional investors. Andromeda will use $17.5 million of the proceeds to finance further trials of the drug. Teva will provide the company with a $3.5 million owners' loan, which will be repaid only from royalties on sales.
If Teva opts for this investment, Clal Biotechnology will receive to put options to buy Teva's stake in Andromeda for $100 million. Teva has the right to reject the put option, but will lose its marketing rights to the drug. The first option will come into effect if and when DiaPep277 receives marketing approval in Europe, and the second if and when it gets marketing approval in the US. The two options give a company value of $555 million for Andromeda. If Clal Biotechnology exercises both options, it will own 52% of the company, fully diluted. After the start of marketing, Teva will pay the company royalties and milestone payments. If the drug is approved for other uses, additional amounts will be paid as well as royalties on the additional sales.
Andromeda was previously known as DeveloGen Israel, and before that, Peptor. The agreement between Teva and Clal Biotechnology is still in effect and includes Teva foregoing some royalties.
Clal Biotechnology CEO Ruben Krupik said, "The new understandings with Teva loyally reflect Clal Biotechnology's declared strategy to add value to our shareholders and create revenue through all drug development stages.
"As development moves forward, Clal Biotechnology will sell some of its holdings for tens of millions of shekels, while retaining the controlling interest in the company, which has hundreds of millions dollars in potential sales."
Andromeda CEO Dr. Shlomo Dagan said, "Formulating this agreement is a critical milestone towards completing development of the drug. I'm pleased that Teva is a potential partner for the entire process. Teva has extensive and successful experience in penetrating ethical drugs into the US and European markets."
Published by Globes [online], Israel business news - www.globes-online.com - on November 26, 2007
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