Emergent BioSolutions plans on taking over Trubion Pharmaceuticals for an up-front consideration of $96.8 million and up to $38.7 million in milestones. The acquisition is expected to diversify Emergent’s pipeline with the addition of Trubion’s two clinical-stage candidates focused on oncology and autoimmunity. Emergent also gains Small Modular Immunopharmaceutic (SMIP™) and Scorpion™ technologies for developing therapeutic candidates.
“This acquisition strengthens Emergent’s biologics capabilities in two key aspects,” states Fuad El-Hibri, chairman of the board of directors and CEO of Emergent BioSolutions. “First, it diversifies our product pipeline beyond infectious diseases into the two high growth areas of oncology and autoimmunity. And, second, it broadens our mAb therapeutic capabilities.
“Emergent’s stable vaccine franchise, substantial capital resources, and expertise in manufacturing and product development combined with Trubion’s world-class therapeutic platform technologies and clinical-stage development programs should translate into significant value over the near and long term.”
Upon closing, the transaction is expected to provide approximately $20 million in cash, net of customary closing costs, and $70 million of net operating losses that are expected to be used over the next 10 years.
Trubion’s development pipeline comprises a CD20-directed SMIP candidate (SBI-087) for the treatment of rheumatoid arthritis (Phase II) and systemic lupus erythematosus (Phase I/II) in partnership with Pfizer. It also has a CD37-targeted SMIP candidate (TRU-016) for the treatment of chronic lymphocytic leukemia (Phase I/II) and non-Hodgkin’s lymphoma (preclinical/Phase I) in partnership with Abbott. Its preclinical candidates, which are based on the SMIP and Scorpion platforms, are being investigated as treatments for select oncology and autoimmune diseases.
Emergent will maintain research facilities in Seattle, WA, upon completion of the acquisition, and the location will become a therapeutics-focused product-development site for the combined company. Taking this transaction into account, Emergent is reaffirming its annual 2010 forecast of $275 to $300 million in total revenues and $40 to $50 million in net income.
Under the terms of the agreement each share of Trubion Pharmaceuticals common stock will be converted into the right to receive an up-front payment of $1.365 per share in cash and 0.1641 shares of Emergent BioSolutions’ common stock. The up-front payment represents a value of $4.55 per share, or approximately $96.8 million.
In the aggregate, Emergent will issue approximately 3,350,000 shares of its common stock as part of the up-front consideration, which after the closing of the merger will represent approximately 9.2% of Emergent's total shares outstanding. Certain shares will be subject to lock-up provisions.
Trubion Pharmaceuticals stockholders will also receive one Contingent Value Right (CVR) per share, which will entitle the holders to receive cash payments based upon achievement of five predefined Phase II and Phase III study initiation milestones and one manufacturing-related milestone. The total potential aggregate value of the CVRs is $38.7 million over a 36-month period following the closing of the merger.
Initiation of the first Phase II study for TRU-016 will trigger a $1.75 million payment; release of TRU-016 manufactured for use in clinical studies will trigger a $10 million payment; initiation of dosing in the first Phase II study for a non-CD20 target will trigger a $0.75 million payment; initiation of the first Phase III study in an oncology indication for TRU-016 will trigger a $15 million payment; initiation of dosing in the first Phase III study for the first major indication for a CD20 candidate will trigger a $6.25 million payment; and initiation of dosing in the first Phase III study for the second major indication for a CD20 candidate will trigger a $5 million payment.