December 22, 2016 (Last Updated: 10:43a.m. PT)
By Mark Terry, BioSpace.com Breaking News Staff
Boston, Mass.-based Tokai Pharmaceuticals and Otic Pharma, a privately-held pharmaceutical company, have essentially merged to become a new company listed on the Nasdaq under the name of OticPharma. But the deal is a little more complicated than a straightforward merger.
Writing for Endpoints News, Arsalan Arif says, “Last August, Tokai became the latest in a long string of public biotechs to hit a brick wall running at full speed. The late-stage failure of its cancer drug galeterone effectively shredded its stock price and its business plan, forcing the company to rapidly ax staffers and start looking for strategic alternatives in the face of an extinction-level event.”
Which is where Otic Pharma comes in. With U.S. headquarters in Irvine, Calif., Otic shareholders will receive a total of 32,172,209 shares of newly issued Tokai common stock. Outstanding Otic Pharma options and convertible securities will be assumed by Tokai. Once completed, Tokai stockholders will own about 40 percent of the combined company, with existing Otic shareholders owning about 60 percent.
The new company will focus on ear, nose, and throat (ENT) disorders. Otic’s lead candidate is a nasally-administered, combination drug (OP-02) for otitis media and Eustachian tube dysfunction I(OM/ETD).
Gregory Flesher, currently chief executive officer of Otic Pharma, will lead the newly combined company. Jodie Morrison, current president and chief executive officer of Tokai will stay on the board of directors. The combined company’s board will have seven members, three chosen by Tokai and four by Otic. The new officers will be Gregory Flesher, president and chief executive officer, Christine Ocampo, chief financial and compliance officer, and Catherine Turkel, chief development officer.
In addition, an investor syndicate for Otic Pharma that includes current shareholders and members of the management team, has agreed to invest $7 million of new capital to the share purchase agreement.
“Over the last several months, Tokai has conducted an extensive review of strategic alternatives aimed at maximizing value for our shareholders over the long-term,” said Morrison in a statement. “We believe the proposed transaction with Otic Pharma, a company that has both a promising pipeline and an experienced leadership team with a track record of creating significant shareholder value in public pharmaceutical companies, advances this goal.”
Arif writes, “While the biotech window hasn’t fully closed this year, it has narrowed considerably following the 2013-2015 go-go years. That’s made reverse mergers like this more appealing to companies like Otic, which is advancing its own early-stage program to mid-stage studies.”
“Our lead program in otitis media, OP-02, has significant potential,” said Flesher, in a statement. “OP-02 is an investigational drug product designed to break the cycle of recurrent and chronic otitis media which affect millions of people around the world. We expect to have Phase I clinical pharmacodynamic data in the first half of 2017 and, with this transaction, to have the capital needed to be able to move directly into Phase II development to explore the product’s ability to prevent otitis media in children.”
