Israel will have the world's largest company for burn and chronic wound treatments, if all goes according to plan in a complex merger deal between Clal Biotechnology Industries Ltd. (TASE: CBI) portfolio companies MediWound Ltd. and Polyheal Ltd., which will come under the control of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA). Under the proposed deal, MediWound will acquire full control of Polyheal, and Teva will gradually increase its stake in MediWound to 51%.
Mediwound has developed a product called Debrase Gel Dressing, for the treatment of second and third degree burns. The product is undergoing a Phase III clinical trial. Polyheal has developed novel microsphere-based wound care technology for treating chronic wounds, such as skin ulcers, burns, trauma, and post-surgery wounds. Clal Biotech cites a report, which estimates the global market for wound treatments at over $9 billion a year.
MediWound will acquire Polyheal in stages for $200 million. To date, less than $15 million has been invested in Polyheal. This is a handsome exit for its founder, CTO Dr. Vladimir Ritter, who owns 15% of the company, as well as for investor Menachem Oren, who owns a similar stake.
At the initial closing of the deal, MediWound will acquire $7 million of Polyheal shares at a company value of $90 million. Later, subject to milestones being reached, MediWound pay another $193 million, at a company value of $90-270 million.
Clal Biotech currently owns 55% of MediWound and 41% of Polyheal, and Teva owns 12% of MediWound.
At the initial closing, Teva will invest $7 million in MediWound and buy $5 million worth of shares from other shareholders, at a company value of $200 million, before money. MediWound will use the proceeds to buy the Polyheal shares. Teva will invest an additional $65 million, at a company value of $200-300 million, before money, in milestone payments related to the development of Polyheal's products.
Under an agreement between Teva and MediWound from 2007, Teva will increase its stake in MediWound in stages to 51%. It will pay $22 million at a company value of $271 million when MediWound obtains market approval for its product in Europe (expected in a few months), and will pay an additional $64 million, at a company value of $593 million, when MediWound obtains market approval for its product in the US.
Teva will also pay MediWound $145 million, in addition to royalties, subject to sales of Polyheal's products. Teva will acquire finance the development of MediWound and Polyheal's products the exclusive marketing rights to them.
When all the deals are completed, Clal Biotech will own 29% of MediWound, which will own 100% of Polyheal.
Clal Biotech says that it is reviewing the accounting effects of the deal, including reducing its stake in MediWound below 50%. If Clal Biotech stops consolidating MediWound in its financial reports, it expects to report a post-tax capital gain of NIS 260-320 million.
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010