Paratek Pharmaceuticals will become a wholly owned subsidiary of Transcept Pharmaceuticals under a reverse merger announced by the companies that will combine their operations into a new company that will take Paratek’s name.

The newly combined company would see $93 million in new investment from a combination of new investors that include The Baupost Group, Abingworth, and other institutional investors—as well as some existing shareholders of Transcept and Paratek. Additionally, the new company would be capitalized with between about $15 million and $18 million of cash on hand at the two current companies.

The new Paratek would carry on development of the current Paratek’s lead asset Omadacycline, a Phase III-ready, oral and intravenous antibiotic drug candidate designed to treat patients with serious community-acquired bacterial infections that include Acute Bacterial Skin and Skin Structure Infections (ABSSSI) and Community-acquired Bacterial Pneumonia (CABP). Omadacycline is designed to shorten hospital stays by allowing for completion of therapy at home with an oral formulation—something the new Paratek hopes will help the compound become the primary antibiotic choice of physicians for treating community-acquired bacterial infections. 

“The combined organization will have the resources to initiate and complete our planned Phase III registration program, as agreed with FDA per Special Protocol Assessments,” for both ABSSI and CABP, Michael Bigham, CEO and chairman of Paratek’s Board of Directors, said in a statement, adding: “We will also explore additional potential indications including urinary tract infections.”

The combined company would take over development of TO-2070, Transcept's remaining product development candidate, a rapidly-absorbed treatment for acute migraine whose active drug is dihydroergotamine (DHE). Transcept has developed TO-2070 through completion of preclinical safety studies, but has not launched a Phase I human pharmacokinetic study.

The new Paratek would also market the Transcept co-developed sleep-aid drug Intermezzo® in much of the world—Purdue Pharma holds commercialization and development rights in the U.S., Canada, and Mexico. Intermezzo was approved by the FDA in 2011, and launched the following year, as the first prescription sleep aid for people who wake up in the middle of the night and can’t get back to sleep with at least four hours of bedtime left.

Paratek shareholders would acquire an 89.6% majority of Transcept’s outstanding capital stock—consisting of 37.9% for existing Paratek equity holders, and 51.7% for persons investing in Paratek as of immediately prior to the closing of the merger—with existing Transcept equity holders retaining their existing equity in return for a 10.4% ownership stake in the newly-combined company.

However, those existing Transcept shareholders will receive, immediately before the closing of the merger transaction, a dividend of cash, plus rights to future royalties on Intermezzo sales, and potential proceeds from any sale of Intermezzo and TO-2070 assets within 24 months following closing.

The merger is subject to customary closing conditions, including approval by the stockholders of each of Transcept and Paratek. Transcept stockholders holding about 43% of its outstanding common stock have agreed to vote in favor of the transaction, as have a majority of Paratek stockholders. 

The boards of directors of both companies have unanimously approved the deal, which is expected to close during the second half of 2014. 

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