Isotechnika Pharma will merge with Aurinia Pharmaceuticals to create a combined company focused on developing clinical-stage nephrology drugs, the companies said today.

The combined company, which will use the Aurinia name, will reacquire full rights to the novel calcineurin inhibitor voclosporin for autoimmune indications, including lupus, and transplantation in the U.S., Europe, and other regions of the world outside of Canada, Israel, South Africa, China, Taiwan, and Hong Kong.

Those rights will be reacquired from ILJIN Life Science, which last month withdrew claims for damages against Isotechnika, resolving a year-long legal dispute over a development, distribution, and licensing agreement. Isotechnika terminated the accord in January 2012, saying it wanted to engage ILJIN and other companies that expressed interest in voclosporin. One of those companies was Vifor Pharma, from which Aurinia was spun out.

In return, ILJIN will own 25% of the new company. ILJIN will also be entitled to C$10 million ($10.03 million) in predefined future milestone payments, plus up to C$1.6 million (about $1.61 million) tied to undisclosed financing milestones. The companies said they expect to complete their merger by March 15, subject to conditions that include approval by the Toronto Stock Exchange, on which Isotechnika shares trade; approval by Isotechnika’s shareholders; and Isotechnika securing a minimum C$3 million ($3.01 million) in debt or equity financing.

The current Aurinia holds the license for voclosporin in lupus nephritis, as well as to the database created by the Aspreva Lupus Management Study (“ALMS”), one of the largest and most important lupus nephritis studies ever conducted. ALMS resulted in development of mycophenolate mofetil as a new standard treatment for the disease.

Aurinia has used the ALMS dataset toward a study of voclosporin set to begin later this year. The combined company plans to assess the results of adding voclosporin to standard of care in treating lupus nephritis through multiple targets.

“This combination has the potential to rapidly and significantly improve patient outcomes. To that end, we expect to launch this Phase IIb study of voclosporin in lupus nephritis in 2013,” Neil Solomons, M.D., the new company’s chief medical officer and until now vp of clinical development at Vifor, said in a statement.

Aurinia is a privately-held spinout of Vifor, part of Swiss-owned Galenica Group, which in 2008 acquired Aspreva Pharmaceuticals for C$915 million ($917.75 million). Several former Aspreva senior managers, directors, and officers went on to join Aurenia’s leadership team.

Robert Foster, Ph.D., Isotechnika’s current president & CEO, will lead the new combined company, while Aurinia’s current CEO, Michael Martin, will be serving as the new company’s president and chief business officer. Dennis Bourgeault, Isotechnika’s CFO, will be the new company’s CFO.

The new company’s board will be chaired by Richard Glickman, L.L.D., a major Aurinia shareholder and Aspreva’s co-founder, chairman, and CEO before its acquisition by Galenica. Isotechnika’s current chairman, Peter Wijngaard, Ph.D., will serve as vice-chairman.

“The consolidation of the intellectual property of these two companies ensures that this significant market opportunity is well protected and provides a powerful platform to create true stakeholder value,” Dr. Glickman said in the statement.

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