Israeli clinical stage biopharmaceutical company Wize Pharma Inc. (OTCQB: WIZP) will merge with privately-held Australian digital currency infrastructure provider Cosmos Capital, in an all share deal, which will ultimately leave Cosmos's shareholders owning most of Wize's shares. Wize, which is controlled by Rimon Gold, the investment arm of serial entrepreneur Yair Goldfinger, US investor Jonathan Rubini, and its CEO Noam Danenberg, will spin off its ophthalmic disorders drug development activities.
Cosmos, which was founded 18 months ago, mainly specializes in mining Bitcoin as well as providing a digital infrastructure, which aims to act as a bridge between the growing digital currency industry and traditional capital markets. Mining Bitcoin is a process of verifying transactions in digital currencies through the solution of a mathematical puzzle that requires major computerized power.
Under the terms of the deal, all shareholders in Cosmos, will receive 38.78 Wize shares and 22.33 options for Wize shares for all the Cosmos shares that they hold. The options will be given for exercising from January 1, 2022.
Following the merger, and subject to receiving an offer to purchase from the Cosmos shareholders, the current shareholders in Cosmos will hold 81.3% of share equity in Wize (87% on the assumption that the options will be exercised in full), and the current shareholders in Wize will be left with 16.3% of the merged company's equity (11.1% subject to meeting targets by 31.12.21 and exercising all options. All the percentages are in relation to full dilution after payments to the transaction's consultants and investment banks.
Subject to the transaction closing in the first quarter of 2021, and based on the average share price of Wize in the past few months, the market value of the merged company is expected to be $75.75 million after meeting the targets by 31.12.21 and exercising all the options.
At the same time as acquiring Cosmos, the spinoff of Wize's drug development activity will be carried out through a Contingent Value Right (CVR) financial instrument. After completion of the acquisition of Cosmos, all those who held Wize shares before the acquisition, will receive one CVR for every Wize share, which will allow those holding it to receive returns when a significant transaction takes place in the biopharmaceutical activity, from the sale of licensing to producing the treatment through to cooperation for commercial marketing of the treatment including the sale of the entire activities. Wize is developing a treatment for inflamed dry eye, which is called LO2A.
In this way, every investor who acquires Wize's shares, after the completion of the merger, will be exposed to both the biopharmaceutical and Bitcoin activities, but Bitcoin will be Wize's main activity, which will maximize value for shareholders.
Wize's management chose to conduct this process after presenting positive Phase II results in November for its clinical trial for LO2A eye drops for the treatment of Sjogren Syndrome, which is a side effect of dry eye. Sjorgen Syndrome is a chronic autoimmune disease and one of its major complications is the development of lymphoma cancer. In the US alone, more than 16 million adults suffer from dry eye, and in 2018 the dry eye market for treating this disease was worth $4.5 billion and it is expected to grow to $6.2 billion by 2024 - the rate of growth shows the large potential that it holds. Sjorgen Syndrome, which as stated develops from dry eye, affects about 0.2-4% of the world's population.
An example of the commercial potential of the eye drops of the type that Wize is developing can be found in a deal that was conducted in May 2019: Swiss pharmaceutical giant Novartis acquired Xiidra, which focused on the eye drops activities of Japanese pharmaceutical company Takeda, for $5.3 billion.
At the same time as the completion of the acquisition of Cosmos, Wize conducted a private investment in public equity (PIPE) worth $3 million to selected investors, and those who participated included Wize CEO Noam Danenberg who is one of its shareholders. After the PIPE, the merged company will have $5 million in cash and Cosmos CEO James Manning will become CEO of the merged company.
Danenberg has more than 30 years of experience in the capital markets, mainly as an angel investor in technology and biopharmaceutical companies. In addition, Danenberg is one of the shareholders and a general partner in the Millennium Food-Tech R&D Partnership, which specializes in investing in food-tech companies and is traded on the Tel Aviv Stock Exchange (TASE). Millennium Food-Tech has so far raised NIS 94 million.
Danenberg said, "We are excited by the deal. Cosmos's team has proved itself so far as a team that brings with it management experience and proven logistical ability in the Bitcoin mining industry. In accordance with the focus of the company in maximizing value for its shareholder public, this transaction allows Wize's shareholders to profit at the same time from both the potential of the biopharmaceutical activities of the company - the drug for treating dry eye - by receiving the CVR and also being exposed to the Bitcoin mining business of Cosmos."
Cosmos Founder and CEO James Manning said, "To be part of a public company traded in the United States is a major process for the continued growth of Cosmos and it will allow us to speed up the expansion of our activities in the future."
Published by Globes, Israel business news - en.globes.co.il - on January 1, 2021
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