UK-based clinical-stage biopharmaceutical firm Mereo BioPharma Group and oncology-focused clinical stage biopharmaceutical business OncoMed Pharmaceuticals have agreed to merge.
The Transaction has been unanimously approved by the Board of Directors of each company.
Subject to potential adjustment as described below, based upon an OncoMed net cash balance of US$38 million at completion, current Mereo shareholders are expected to own approximately 75% of the issued share capital of the Enlarged Group, while current OncoMed shareholders are expected to own approximately 25% of the issued share capital of the Enlarged Group (through their holding of ADRs)
In addition, OncoMed shareholders will receive CVRs representing the right to receive future conditional cash payments and additional ADRs based on the achievement of certain milestones relating to OncoMed assets .
Mereo’s CEO , Dr Denise Scots-Knight said: “I am delighted to announce our proposed combination with OncoMed. The Transaction allows us to broaden our asset base, including strengthening our cash position to enable us to progress beyond our key clinical milestones.
“We believe that our plan to initiate a US ADR programme on NASDAQ, in addition to the continued listing of our ordinary shares on AIM, will facilitate a deep engagement with the broadest range of appropriate investors.”
OncoMed’s president and CEO Dr John Lewicki said: “We believe this is a value-enhancing transaction for both companies, forming an organization with a much expanded pipeline of diversified assets and strengthened capabilities and resources. We look forward to working closely with the Mereo team to finalize the transaction and assist in assimilation of the combined assets.”
Pursuant to the terms of an agreement and plan of merger and reorganization, unanimously approved by each party’s Board of Directors, each share of OncoMed issued and held immediately prior to the Transaction becoming effective will be converted into the right to receive: (i) Mereo ADRs pursuant to an exchange ratio described in more detail below and (ii) one CVR representing the contingent right to receive certain cash payments and Mereo ADRs upon the achievement of certain milestones relating to etigilimab and navicixizumab. OncoMed will become a 100% owned subsidiary of Mereo on closing of the Transaction.
Subject to certain adjustments to the exchange ratio as described further below, based upon an OncoMed net cash balance of US$38 million at closing of the Transaction, Mereo is expected to issue approximately 23.7 million new ordinary shares (“Ordinary Shares”) which will be deposited with a depositary in order to issue Mereo ADRs to current OncoMed shareholders (based on a ratio of one Mereo ADR for every five new Ordinary Shares issued), and current OncoMed shareholders are expected to own approximately 25% of the issued share capital of the Enlarged Group immediately following completion of the Transaction. The Ordinary Shares underlying the Mereo ADRs to be issued in exchange for each OncoMed share in the Transaction represent an aggregate value of approximately US$57.4 million (based on the Mereo share price of 190 pence at close on 4 December 2018) and a premium of 34% over the OncoMed market capitalisation of US$42.9 million on 4 December 2018.
The ADR consideration to be issued to OncoMed shareholders in connection with the Transaction is subject to the following adjustments:
The aggregate number of ADRs to be issued to OncoMed shareholders is based on an exchange ratio that is subject to adjustment based on OncoMed’s net cash balance at completion. OncoMed shareholders will receive a greater or lesser number of ADRs if OncoMed’s net cash balance at completion is greater or less than US$38 million, respectively, with OncoMed shareholders receiving a proportionally lesser number of Mereo ADRs for each dollar of OncoMed net cash below US$36.5 million.
If the milestone relating to etigilimab set forth in the CVR and further described below is satisfied prior to closing of the Transaction, the number of Mereo ADRs to be issued to OncoMed shareholders at closing of the Transaction will be increased as a result of the cash amount received by OncoMed from Celgene in connection with the exercise of such option. In those circumstances the CVR would no longer include a milestone relating to etigilimab.
Each OncoMed shareholder will also receive a CVR for each OncoMed share held immediately prior to completion representing the right to receive:
Additional Mereo ADRs in the event that Celgene exercises its option in respect of etigilimab and pays OncoMed the associated milestone payment of US$35 million prior to 31 December 2019.
The number of new Mereo ADRs to be issued in such case will be based on an exchange ratio calculated by dividing the net milestone amount received by Mereo from Celgene by the prevailing share price of Mereo following the announcement of the exercise of such option, subject to the limitation that in no event will Mereo be obligated to issue ADRs representing underlying Ordinary Shares (both at completion under the merger agreement and when combined with ADRs to be issued pursuant to the CVRs) which represent more than 40% of the issued share capital of the Enlarged Group (with such limit calculated by reference to the issued share capital of Mereo immediately prior to completion); and
Additional cash consideration equal to 70% of the net proceeds of milestone payments actually received by Mereo within a period of 5 years following completion of the Transaction from certain future partnership or investment transactions in relation to navicixizumab, subject to an aggregate cap of approximately US$80 million. The balance of any milestone payments received would be retained by Mereo.
Following completion, the Mereo Board of Directors will be expanded to 10 persons to accommodate the appointment of current OncoMed directors Michael Wyzga and Dr Deepa Pakianathan as independent non-executive directors.
Michael Wyzga currently serves as a Chief Financial Officer of Aura Biosciences, Inc. and was formerly President and Chief Executive Officer of Radius Health, Inc. and the Chief Financial Officer and Executive Vice President of Genzyme Corporation. Dr Deepa Pakianathan is a Managing Member at Delphi Ventures and serves on the board of directors of Alder Biopharmaceuticals, Inc., Karyopharm Therapeutics and Calithera Biosciences.
The Transaction constitutes a substantial transaction for Mereo for the purposes of Rule 12 of the AIM Rules.
Application is expected to be made at the time of completion of the Transaction to the London
Stock Exchange for the new Ordinary Shares in respect of the Transaction to be admitted to trading
on AIM and which are to be issued to OncoMed shareholders by means of the issue of a
proportionate number of Mereo ADRs expected to be admitted to trading on the NASDAQ Stock Market LLC trading platform (“NASDAQ”).
The Transaction is subject to customary closing conditions including, among other things, approval of the transaction by shareholders of OncoMed, the listing of the Mereo ADRs on NASDAQ and the admission to trading of the Ordinary Shares to be issued in connection with the Transaction on AIM.
The Company expects to publish and file with the SEC a Registration Statement on Form F-4, which will include a proxy statement of OncoMed that also constitutes a prospectus of Mereo under SEC filing rules.
In total, the Company has received irrevocable undertakings to support the Transaction of Mereo shareholders in respect of holdings totalling, in aggregate, 36,949,063 Mereo Ordinary Shares, representing 51.9% of Mereo’s existing Ordinary Shares currently in issue. In total, OncoMed has received irrevocable undertakings to vote in favour of the resolutions to effect the Transaction to be proposed at the general meeting of OncoMed shareholders in respect of holdings totalling, in aggregate, 4,130,907 OncoMed shares of common stock, representing 10.69% of OncoMed’s outstanding shares of common stock.
Mereo is a biopharmaceutical company focused on the development and commercialization of innovative therapeutics that aim to improve outcomes for patients with rare diseases.
Mereo’s strategy is to selectively acquire product candidates that have already received significant investment from pharmaceutical companies and that have substantial preclinical, clinical and manufacturing data packages.
OncoMed is a US-based clinical stage biopharmaceutical company focused on discovering and developing novel anti-cancer therapeutics. OncoMed currently has three therapeutic candidates in development (Phase 1/1b).
OncoMed currently has a strategic alliance with Celgene and milestone payments and investments from this collaboration (and prior collaborations with GlaxoSmithKline LLC and Bayer Pharma AG) have supported the advancement and growth of its product pipeline.
Source: Company Press Release