Vical and Brickell to Merge in All-Stock Deal

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San Diego-based Vical, Inc. and Boulder, Colo.-based Brickell Biotech announced a merger deal. It is an all-stock transaction. Upon closing, they will operate under the name Brickell Biotech and trade on the Nasdaq under a new, not-yet-named ticker symbol.

Under the terms of the merger, existing Vical stockholders will own 40% of the combined company and Brickell shareholders will own 60%. That split is based on a $60 million valuation for Brickell and a $40 million valuation for Vical, based on a premium to the 30-day volume weighted average share price of Vical.

Both companies’ boards of directors have approved the merger as well as the required percentage of Brickell stockholders. The deal is expected to close in the third quarter of 2019. It still needs to be approved by the Vical shareholders.

Brickell’s lead pipeline compound, sofpironium bromide, is Phase III-ready for the treatment of axillary hyperhidrosis. Brickell’s development partner, Kaken Pharmaceutical, reported positive Phase III data in a clinical trial in Japan. Data was presented in February 2018 at the 76th American Academy of Dermatology Annual Meeting. The drug met its primary efficacy endpoint of hitting at least a 1-point improvement in the Hyperhidrosis Disease Severity Measure-Axillary (HDSM-Ax). Statistically significant treatment responses were noted as early as Day 8 for both the 5% dose group and 15% dose group. The response continued throughout the treatment period.

Vical focuses on developing treatments using its plasmid DNA. Its Faxfectin is a novel proprietary cationic lipid-based formulation that enhances both plasmid DNA-based vaccines as well as protein-based vaccines. The company entered into a worldwide, nonexclusive license deal with Bristol-Myers Squibb in September 2012 for platform DNA immunization tech and the Vaxfectin adjuvant for use in producing antibodies.

In February, Vical discontinued its Phase II trial of VL-2397, which had begun in the first quarter of 2018. The company decided then to hold back on its funds while it evaluated alternate strategies, as well as because of low patient accrual rates. VL-2397 was being tested as a first-line treatment for invasive aspergillosis in immunocompromised adults with acute leukemia or recipients of an allogeneic hematopoietic cell transplant.

Brickell has three areas of focus: hyperhidrosis (chronic excessive sweating), cutaneous T-cell lymphoma, and psoriasis.

“Following an extensive review of many strategic alternatives, we decided that the proposed Merger with Brickell provides the best opportunity for Vical’s stockholders,” stated Vijay B. Samant, president and chief executive officer of Vical. “We believe that Brickell’s lead compound, sofpironium bromide, based upon all of the clinical data generated to-date, has the potential to be a best-in-class treatment for axillary hyperhidrosis. We are optimistic that the strength of the Brickell executive leadership team, which has experience launching several drugs with other pharmaceutical companies, coupled with an innovative pipeline of new chemical entities for impactful skin diseases, will enable the combined company to reach significant value inflection points.”

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An affiliate of NovaQuest Capital Management has agreed to provide up to $25 million in near-term R&D funding to Brickell after the merger. Immediately after the closing, the combined company will issue a warrant to NovaQuest to acquire shares of Vical common stock on an amount based on 10% warrant coverage on the $25 million funding and the exchange ratio for the merger.

The merged company will use the NovaQuest proceeds, in addition to Vical’s cash balance, which it believes will be about $35 million, to mostly fund the development of sofpironium bromide through Phase III clinical trials in axillary hyperhidrosis.

After the merger, the combined company will be led by current Brickell management, including Robert Brown and chief executive officer, Andy Sklawer, co-founder and chief operating officer, Deepak Chadha, chief R&D officer, R. Michael Carruthers, chief financial officer, Gary Walker, chief marketing officer, and David McAvoy, general counsel. Corporate headquarters will be in Boulder, Colo.

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