Aegerion Pharmaceuticals and QLT capped a troubled few years for both companies by saying today they will merge, creating a combined company with two marketed drugs and a Phase III–ready candidate, all focused on treating rare diseases.
The combined company’s portfolio would include Aegerion’s two commercially branded products—Juxtapid® (lomitapide) capsules and Myalept® (metreleptin)—and QLT’s QLT091001 (zuretinol acetate or zuretinol), a synthetic retinoid product candidate expected to advance to Phase III clinical trials in the third quarter of this year.
Zuretinol is being developed for Inherited retinal disease caused by underlying mutations in the RPE65 or LRAT genes, comprising Leber congenital amaurosis and retinitis pigmentosa. Zuretinol has Orphan Drug designation from both FDA and EMA, as well as FDA Fast Track designation.
Under the merger deal, Aegerion will be merged with a wholly owned indirect subsidiary of QLT. Each outstanding share of Aegerion common stock will be exchanged for 1.0256 shares of QLT common stock upon completion of the deal.
Concurrent with signing, Aegerion and QLT have entered into a loan agreement under which QLT has agreed to loan Aegerion up to $15 million for working capital. Aegerion will borrow $3 million in connection with execution of the merger agreement and may borrow up to $3 million per month in subsequent months, subject to certain conditions, if and to the extent such amounts are necessary in order for Aegerion to maintain an unrestricted cash balance of $25 million.
The combined company would change its name from QLT to Novelion Therapeutics and trade its common shares on the NASDAQ Global Select Market and the Toronto Stock Exchange. Novelion is expected to have its principal headquarters in Vancouver, BC, where QLT is currently located, with business operations in Cambridge, MA.
The companies said a syndicate consisting of new investors and existing shareholders of both companies has committed to invest approximately $22 million in QLT, at a purchase price of $1.76 per share, and vote in favor of the proposed transaction.
The investment and loan are expected to provide Novelion with additional capital to support future operations and the potential opportunity for targeted business development initiatives, helping give the new company an unrestricted cash balance of over $100 million, according to Aegerion and QLT.
The investment would be funded immediately before completion of the deal, which is expected to occur late in the third quarter or during the fourth quarter of this year. The merger has been approved by the boards of both companies, but is still subject to approval by shareholders representing a majority of the outstanding common stock of each of QLT and Aegerion as well as other closing conditions.
QLT shareholders, including the investors, are expected to own approximately 67% of Novelion’s common shares, with the remaining 33% to be owned by current Aegerion shareholders.
“We believe QLT’s clinical development team, and meaningful cash position, and Aegerion’s commercialization expertise will help unlock significant value in QLT’s zuretinol asset and enable Novelion to pursue important milestones across a commercial and late-stage portfolio, including potential regulatory approval in Japan for Juxtapid and potential regulatory filings in Europe for Myalept,” stated Aegerion CEO Mary Szela, who will hold the same position with Novelion.
The merger announcement follows a series of setbacks for Aegerion and QLT. Aegerion in May agreed to plead guilty to two misdemeanors, pay $40 million, and settle allegations that it violated drug marketing requirements, securities law, and the Health Insurance Portability and Accountability Act.
In February, the company said it was eliminating about 25% of its workforce in a plan to stretch its cash as U.S. sales of its cholesterol treatment Juxtapid face growing competition. Approximately 80 jobs were eliminated, Aegerion said May 16 in a quarterly regulatory filing. And in July 2015, Aegerion changed CEOs when Marc Beer—whose statements about Juxtapid’s safety on CNBC led to an FDA warning letter—resigned under pressure from activist investor Alex Denner’s Sarissa Capital.
Sarissa is among existing Aegerion and QLT shareholders that are joining with new investors to form the investor syndicate. The other shareholders include Armistice Capital, Broadfin Capital, Healthcare Value Capital, JW Asset Management, K2 & Associates Investment Management, Sarissa Capital, Tiger Legatus Capital Management, and others.
QLT sought to merge in recent years with Auxilium Pharmaceuticals and InSite Vision, only to be thwarted. In October 2014, Endo terminated a planned $345 million merger with Canadian drug developer QLT after persuading Auxilium Pharmaceuticals instead to be acquired for $2.6 billion.
Last year, QLT and InSite announced a merger, but the deal fell through after InSite changed its mind and accepted a higher merger offer from Sun Pharmaceutical Industries.
“I believe that this proposed merger represents a fresh start and an opportunity to create significant value, and I look forward to driving our programs forward,” Szela added.
