Avexa Limited and Progen Pharmaceuticals Limited Agree to Merge in a $82 Million Deal

BRISBANE, Australia & MELBOURNE, Australia--(BUSINESS WIRE)--Biotechnology companies Progen Pharmaceuticals Limited (ASX:PGL - News) (NASDAQ:PGLA - News) and Avexa Limited (ASX:AVX - News) today announced the signing of an exclusive and binding Merger Implementation Agreement (MIA). Progen will propose to shareholders an AUD$20 million share buyback option, to be completed prior to the merger. The combined entity will have over AUD$60 million cash at transaction closing (assuming the AUD$20 million Progen share buyback is fully subscribed). Shareholders from both companies will vote on the proposed merger in the first quarter of 2009.

The merger has been unanimously recommended by the Boards of Directors of both Progen and Avexa. The combined entity creates a well-funded, small molecule drug development company with a balanced portfolio of oncology and infectious disease programs in various stages of development. A key focus for the new company will be the continued development of the Phase III drug apricitabine (ATC), a new antiretroviral drug for the treatment of HIV-infected patients. ATC is one of only two new HIV therapies in Phase III clinical trials worldwide. To date, every HIV therapy that has previously commenced Phase III testing has successfully completed these trials and ultimately been approved in major markets. The merger will provide sufficient cash to fund the first pivotal Phase III trial of ATC through to its week 24 milestone, a key value inflection point and potential start of an NDA filing.

“This transaction provides a unique opportunity for Progen shareholders to invest in an integrated portfolio with near term milestones that include Avexa’s exciting Phase III program,” said Justus Homburg, Chief Executive Officer of Progen. “In early November, Progen’s Board of Directors announced a proposed capital return that was subject to the consideration of a number of other proposals brought before the Board. After extensive deliberation of those proposals, we believe that a combination with Avexa, together with a share buyback of up to AUD$20 million, offers the most potential to generate shareholder value.”

“This merger not only gives the combined company sufficient financial resources to fund Avexa’s Phase III study with ATC, it also provides a much broader pipeline for both sets of shareholders,” said Julian Chick, Chief Executive Officer of Avexa. “We will not be the first company to jointly harness the therapeutic areas of oncology and infectious disease, as Gilead Sciences, Ardea Biosciences, and Anadys have similar synergistic strategies. As a result, the merged entity will have a higher quality portfolio of opportunities than either company individually.”

In addition to continuing ATC’s development path towards commercialisation, both companies recognize the importance of developing a broad portfolio of assets. The new company will continue to progress selected programs in oncology and infectious disease based on likelihood of success to maximize shareholder value. The union also enhances the opportunity to seek partnerships for late and early stage product candidates.

Prior to the merger, Progen will propose to return up to AUD$20 million in cash to its current shareholders through a share buyback at AUD$1.10 per share. This share buyback offers Progen shareholders flexibility, within broad parameters, to choose how much cash and how many shares in the new entity they would prefer to own.

Under the terms of the MIA, Progen will issue Avexa shareholders one Progen share for every 12.857 Avexa shares1. Based on Avexa’s current share price of AUD$0.105 per share, this ratio implies a value of AUD$1.35 per Progen share, a premium of 49.6% to the current Progen share price of AUD$0.90 per share. The implied value per Progen share of AUD$1.35 is greater than the expected net cash backing per Progen share of between AUD$1.10 to AUD$1.15 per share at transaction closing, which reflects the value of Progen’s oncology portfolio and the premium attached to cash in the current market. The merged entity will therefore be owned 56 percent by Progen shareholders and 44 percent by Avexa shareholders (assuming the $20 million buyback is fully subscribed).

The merged company will be named Avexa Pharmaceuticals Limited with headquarters in Melbourne, Australia and offices in both Brisbane, Australia and the San Francisco Bay Area. The Board of Directors will comprise Nathan Drona (Chairman), David Bottomley and Dr John Sime from Avexa, and Dr. Mal Eutick, John Lee and Justus Homburg from Progen. Avexa’s CEO, Dr. Julian Chick, will be Managing Director and Chief Executive Officer, and a member of the Board.

Progen and Avexa will host a joint conference call to discuss the merger proposal. The call will take place in Australia on Monday 22 December 2008 at 11:00 AM (Sydney time) and in the U.S. on Sunday 21 December at 4:00 PM PST / 7:00 PM EST. Participants may join the call by dialing from the following locations: Australia 0011-800-462-66666 (toll free); United States and Canada: (877) 407-8035 (toll free); non-U.S. +1 (201) 689-8035. Those interested in hearing the discussion may also access a live webcast of the conference call on the websites of both Progen: www.progen.com.au and Avexa: www.avexa.com.au.

A replay of this call will be available by dialing +1 (201) 612-7415 for Australian and non-US participants. For US participants dial (877) 660-6853. When prompted enter Account Number 286 and Conference ID Number 307901. The webcast will also be available via the companies’ respective websites.

Transaction and timetable details

A copy of the MIA will be lodged on the ASX in conjunction with this release. The merger is subject to a number of conditions including regulatory approvals, court approvals, Avexa and Progen shareholder approvals and other conditions as set out in the MIA. The merger is unanimously recommended by the Boards of both Avexa and Progen, subject to no superior proposals and to an opinion from an independent expert that the transaction is in the best interests of Avexa shareholders. The MIA includes a commitment by each party not to solicit alternative transactions to the merger. Each party has agreed to pay a break fee of AUD$500,000 under certain circumstances.

Progen will hold a meeting of Progen shareholders to approve the share buyback in late February 2009. In addition, Progen shareholders will have an opportunity at this meeting to approve the merger with Avexa and the change of name to Avexa Pharmaceuticals Limited. Progen shareholder documents are expected to be dispatched in late January 2009.

A Scheme Booklet, setting out the terms for the merger, the report from the independent expert, and the reasons for the Avexa Board of Directors’ recommendation, is expected to be sent to all Avexa shareholders in early February 2009. A meeting of Avexa shareholders to approve the Scheme is expected to be held in March 2009.

Avexa has appointed Gresham Advisory Partners as its financial adviser and Mallesons Stephen Jaques as legal adviser. Progen has appointed PricewaterhouseCoopers as its financial adviser and Clayton Utz as legal adviser.

About Avexa

Avexa Limited is a Melbourne-based biotechnology company with a focus on discovery, development and commercialisation of small molecules for the treatment of infectious diseases. Avexa has dedicated resources and funding for key projects including its HIV integrase program and an antibiotic program for antibiotic-resistant bacterial infections. The Company’s lead program is apricitabine (ATC), an anti-HIV drug which has successfully completed the 48 week dosing of its Phase IIb trial and is currently in Phase III trials worldwide. www.avexa.com.au

About Progen

Progen Pharmaceuticals Limited is a globally focused biotechnology company committed to the discovery, development and commercialization of small molecule pharmaceuticals primarily for the treatment of cancer. Progen has built a focus and strength in anti-cancer drug discovery and development. Progen targets the multiple mechanisms of cancer across its three technology platforms, angiogenesis, epigenetics and cell proliferation. Progen has operations in Australia and the United States of America. www.progen.com.au

1 This ratio may be adjusted under the terms of the Merger Implementation Agreement depending upon the level of liquid assets of Progen.

Contact:

Avexa Dr. Julian Chick, +61 3 9208 4300 Chief Executive Officer or Progen T Justus Homburg, +61 7 3842 3333 Chief Executive Officer or Blueprint Life Science Group Sabrina Antoniou, + 61 2 9519 5537 (AU Investor Relations) Remy Bernarda, + 1-415-375-3340 x2022 (US Investor Relations)

Source: Avexa Limited

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