Clal Biotechnology Industries Ltd. (TASE: CBI) has announced that its board of directors has approved the acquisition of three life sciences holdings of its controlling shareholder, Len Blavatnik's Access Industries Inc. The $7.3 million cash payment will be made in twelve and a half years. The payment will bear 2.7% annual interest, which will accumulate until the actual payment, which may be brought forward depending on value creation events by the companies.
Clal Biotech also decided to acquire from Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) its holdings in oncology company CureTech Ltd., which the two companies jointly own.
Both measures are part of far-reaching changes underway at Clal Biotech, which until recently was a life sciences holding company controlled by IDB Holding Corp. Ltd. (TASE:IDBH) unit Clal Industries and Investments Ltd. (TASE: CII) with a 56% stake and Teva, with a 14% stake. Teva was highly involved in Clal Biotech. Following the changes at Teva, which has quit most of its external projects, and following IDB's sale of Clal Industries to Blavatnik, Clal Biotech plans to change from a holding company into an independent pharmaceutical company. The two measures announced are part of this strategic change.
Clal Biotech will acquire Access Industries' stakes in three companies, held through Access BridgeGap Ventures LLC: 64% of Vedantra Pharmaceuticals Inc., which is developing a malaria vaccine; 50% of Mnemosyne Pharmaceuticals Inc., which is developing an anticlotting drug; and 49% of eXithera Pharmaceuticals LLC, which operates in the field of cognition and memory. All the companies are early-stage ventures, and Clal Biotech believes that they will not be material holdings, even though they all operate in big markets.
The acquisitions will give Clal Biotech a base of operations in the US, which it will be able to use for its portfolio companies and to seek new opportunities. Closure of the deal is subject to approval by Clal Biotech's general shareholders meeting.
CureTech's estimated value tops $15 million
Clal Biotech's payment for CureTech is also not immediate. It will pay Teva 20% of CureTech's future revenue, either from sales or an exit, up to a maximum of $44.5 million. The parties signed these payment terms in the event of the termination of the development agreement when Teva first invested in CureTech. They reflect a value of $15 million for CureTech, but Clal Biotech believes that the company's actual value is much higher.
Clal Biotech reported a gain of NIS 250 million ($68 million) when it signed the commercialization agreement with Teva. Clal Biotech reported the gain because it lost control of CureTech, and under International Financial Reporting Standards (IFRS), it now reported CureTech on a valuation basis, rather than the actual investment. Today, although the agreement with Teva is cancelled, Clal Biotech continues to record CureTech on the basis of its last valuation. For its part, Teva has written off $127 million for terminating the project with CureTech.
CureTech's lead drug candidate, CT-011, has successfully undergone a Phase II clinical trial (efficacy study) on two types of blood cancer, and is now undergoing additional Phase II trials on colon and skin cancers. The company's next big step is a Phase III clinical trial, which is usually expensive, and it will presumably seek a development and marketing partner for the drug to replace Teva.
Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2013
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