Novacea hopes that the transaction will benefit shareholders, who suffered after the firm’s prostate cancer IND application was put on hold.

Reeling from a stalled prostate cancer clinical trial, Novacea has agreed to merge with Transcept Pharmaceuticals in an all-stock transaction. Novacea believes that Transcept’s insomnia drug candidate, Intermezzo®, which has completed Phase III trials, will provide the company the boost it needs.

Under the terms of the merger agreement, Transcept stockholders are expected to own 60% of the combined company, which will keep the Transcept Pharmaceuticals name.

Novacea stockholders holding approximately 35% of its outstanding common stock have agreed to vote in favor of the transaction. Additionally, Transcept stockholders holding about 80% of Transcept capital stock report that they will vote in favor of the merger. The deal is expected to close during the fourth quarter of 2008 or the first quarter of 2009.

“Assuming a close near the end of 2008, the combined companies will have an estimated cash balance of $88 to $92 million,” states Glenn A. Oclassen, president and CEO of Transcept.

In November, Novacea terminated its Phase III study of Asentar™ due to an imbalance of deaths between the treatment and control arms. The firm’s value decreased over 50% and has been trading below $3 on average.

The trial was designed to compare Asentar and Taxotere® with Taxotere alone in patients with androgen-independent prostate cancer. Novacea is still preparing a complete response to the FDA regarding releasing the clinical hold on the Asentar IND application.

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