Syneron in advanced talks to buy Transpharma

TransPharma is seeking to sell its operations following the failure of its transdermal treatment for osteoporosis.

Aesthetic surgical devices maker Syneron Medical Ltd. (Nasdaq: ELOS) is in advanced talks to acquire the operations of TransPharma Medical Ltd., which is developing transdermal drug delivery solutions for $15 million. TransPharma has $10 million in cash; the sale price is $5 million more than the company's cash.

TransPharma's management declined to confirm the report, and Syneron was not available for response.

TransPharma is seeking to sell its operations following the failure of its treatment for osteoporosis. The trial was conducted by Eli Lilly & Co. (NYSE: LLY), which has a joint drug development agreement with TransPharma. The agreement, which was terminated after the trial failure, had TransPharma's main source of income for several years.

TransPharma's main shareholders are Clal Biotechnology Industries Ltd. (TASE: CBI), with a 12% stake, Pitango Venture Capital, Evergreen Venture Partners, and Vitalife Life Sciences Venture. It has raised $34 million since it was founded, and received tens of millions of dollars in milestone payments from Eli Lilly. The last transaction in TransPharma's shares, in February 2011, was made at a company value of $41.6 million, before money, when Clal Biotech bought 6% of the company.

Clal Biotech said that it will report a loss of NIS 26 million in its upcoming financial report as a result of TransPharma's failure, and that it was writing off most of the investment in the company, except for its cash reserves. Clal Biotech might recover some of its losses in a sale of TransPharma to Syneron. Clal Biotech said that TransPharma was never a material holding.

TransPharma was once a great home of Israel's life sciences industry. Serial entrepreneur Yossi Gross and CEO Dr. Dafna Heffetz founded the company in 2000 to develop an innovative delivery method for biological drugs through the skin rather than by injection.

TransPharma's ViaDor product was a device that used radio frequency to painlessly open micro-channels in the skin through which the drug is delivered. The company also had to develop special versions of pharmaceuticals for use with ViaDor - special patches in which the drug was impregnated as a powder that liquefied when the micro-channels were opened at which point the drug came into contact with body fluids.

TransPharma initially had an agreement with Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) to develop a growth hormone for use with the ViaDor, Teva withdrew after a joint trial failed to persuade it that the product was competitive in the market. TransPharma recovered from the setback and independently developed a product for osteoporosis on the basis of its technology, and brought the product to a stage that it interested Eli Lilly. Eli Lilly made a $35 million down payment, and committed up to $1 billion in milestone payments.

Although TransPharma has other products in the pipeline, the termination of the agreement with Eli Lilly dried up the funding for these programs. Apparently unable to raise capital to develop another clinical trial stage product, it was decided to sell the company.

Last month, Syneron acquired another struggling Israeli life sciences company, Ultrashape, which has developed focused ultrasound devices for the removal of fatty tissue, for $12 million. However, in contrast to Ultrashape, whose products supplement those of Syneron, TransPharma's transdermal drug delivery system appears to have little relationship to Syneron's business - except that the product could have cosmetic uses. With a suitable conversion, the opening of micro-channels in the skin could enable the delivery of substances directly to the dermal layer, instead of through the bloodstream.

Syneron, founded by chairman Shimon Eckhouse, and run by CEO Louis Scafuri, has an RF depilatory device, and it sees a similarity with TransDerma's RF device. At the current price, it is worthwhile for Syneron to buy TransPharma's device, even if its use for cosmetics is a long way off.

Syneron's share price fell 2.7% yesterday to $10.85, giving a market cap of $380 million.

Published by Globes [online], Israel business news - www.globes-online.com - on March 7, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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