Israeli company RDD Pharma, which specializes in ano-rectal and lower intestinal diseases, has announced that it is merging with Nasdaq-listed Innovate Biopharmaceuticals Inc. (Nasdaq: INNT), which develops drugs for autoimmune diseases. The merged company will be known as 9 Meters Biopharma (nine meters is the average length of the intestine in the human body). The merger will be accompanied by a financing round led by venture capital fund Orbimed, which previously invested in RDD.
Under the agreement, all of RDD's shares will be assumed by Innovate in exchange for 41.5% of its shares. RDD shareholders may obtain a larger proportion of the shares, depending on the size of the financing round. The private placement led by Orbimed is designed to raise $25 million, $10 million of which will be provided immediately and the rest according to milestones. Innovate's current market cap is $39 million, after the company's share price gained a total of 9% in recent days, following the announcement of the merger.
In addition to Orbimed, RDD's shareholders include Capital Point, a listed company, with 18.3% of RDD's shares; Agate Medical Investments, a fund controlled by Dani Naveh; Dr. Arie Giniger; Kitov Pharmaceuticals CEO Isaac Israel; and Mor Research Applications, which commercializes the developments of Clalit Health Services. RDD CEO John Temperato will be appointed CEO of the merged company, which will have its headquarters in the US, while the company's development center will remain in Israel.
RDD is conducting clinical trials of its products, including a product for treatment of fecal incontinence, for which Phase II trials have been completed; a product for treatment of chronic pruritus ani (anal itching), which is in Phase II trials; and a product for treatment of colitis caused by radiation therapy, which is in initial human trials.
Innovate has a product in Phase III trials for treatment of celiac disease, result of which will be published only in 2021. The same product is also in preclinical trials for treatment of fatty liver and Crohn's disease. Another of Innovate's products, which is also in Phase III clinical trials, is a molecule used in imaging tests of the bile duct and the pancreas.
Innovate's market cap, which is low for the stage that its products have reached and the size of the potential market, can be attributed to the results of its Phase II trials for its celiac treatment which were not clear cut, according to the Vantage capital market website. Unclear results before entering Phase III trials are liable to put a company in a severe cash crunch, which is what happened to Innovate.
The merger with RDD will give Innovate not only cash from the financing round, but also additional advanced products that will enable it to publish a stream of announcements that will alleviate the ennui liable affect the company's investors until its results are published. "People live with intestinal diseases, for example celiac, and are waiting for solutions. The merger will create a product pipeline with diverse drugs that have already proven their practicality," Orbimed senior managing director Dr. Nissim Darvish said.
Published by Globes, Israel business news - en.globes.co.il - on October 10, 2019
© Copyright of Globes Publisher Itonut (1983) Ltd. 2019