US pharmaceutical company Hyperion yesterday signed a deal for its acquisitions by another US company, Horizon Pharma. This agreement also has consequences for Israeli biomedical holding company Clal Biotechnology Industries Ltd. (TASE: CBI), which last year signed an agreement for the sale of its Andromeda subsidiary to Hyperion.
The immediate consequence is a rise in the value and liquidity of the Hyperion shares held by Clal Biotech, acquired in the Andromeda deal. This change will increase Clal Biotech's profit by NIS 22.5 million. Hyperion was sold for $1.1 billion, a 35% premium on the market price on the day of the announcement. Clal Biotech, a subsidiary of Clal Industries and Investments Ltd. (TASE: CII), controlled by Len Blavatnik, is traded at a NIS 727 million market cap.
Andromeda was sold to Hyperion in April 2014. A $20 million advance was paid in the sale, including $7.5 million in Hyperion shares (whose value has meanwhile risen 84%, taking the price of the current deal into account). Clal Biotech was due to receive an additional $500 million, had the product been approved and sold well.
In September 2014, Hyperion unilaterally announced that as a result of irregularities in the clinical trial of a diabetes drug on the part of certain Andromeda employees, it would be unable to continue promoting the drug, and was suspending its development. After Clal Biotech sued Hyperion and demanded the data leading to this conclusion, the parties reached a compromise in which Hyperion would continue the then current Phase III trial of the drug, in which there were no irregularities as far as known; the trial would be monitored by an independent committee; and if the trial eventually succeeded, the product would revert to Clal Biotech for a payment of $3.5 million.
Sources close to Clal Biotech said that the cooperation with Hyperion since the signing of the compromise agreement was progressing as planned. It appears that the results are expected in a manner of months. As far as is known, Horizon plans to honor the agreement that Hyperion signed with Clal Biotech.
Earlier this week, Clal Biotech reported the cancelation of a request for a class action suit alleging that it had published misleading results for the trial of Andromeda's drug. The claimant decided to withdraw the claim after deciding that it had little chance of succeeding. Another outstanding claim against Clal Biotech in the Andromeda affair alleges that the company posted an immediate NIS 500 million profit following the sale of Andromeda, without taking into account that the amount included future conditional payments. Following the Hyperion announcement of the alleged fraud, Clal Biotech was obliged to write off almost this entire profit.
Published by Globes [online], Israel business news - www.globes-online.com - on March 31, 2015
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