Sometimes biotech startups can find a backdoor route to going public without going to all the trouble of doing an IPO, and that’s what Seattle-based Allozyne just did today.
Allozyne, the developer of a long-lasting protein drug for multiple sclerosis, said today it has agreed to a merger with San Francisco-based Poniard Pharmaceuticals (NASDAQ: PARD) in which the little private company is essentially acquiring Poniard. Allozyne CEO Meenu Chhabra will lead the newly combined company, Allozyne shareholders will own 65 percent of the new entity, and Allozyne will control four of the seven board seats.
The combined company, to be headquartered in Seattle, plans to develop Allozyne’s experimental drugs and technology, and find a partner to carry on with Poniard’s lead asset, a cancer drug called picoplatin.
Poniard, the company known years ago as Seattle-based NeoRx, has retained its listing as a public company, but has essentially turned into a shell of its former self since picoplatin failed in the third and final phase of clinical trials in November 2009. The company lost about 80 percent of its stock value that day, and the stock was valued at just 19 cents a share today before the Allozyne deal was announced—meaning Poniard was only worth about $11 million heading into today.
So this is a deal that enables Poniard shareholders to get some new drugs that might be worth something, while it provides Allozyne with a way to connect with a new class of public investors, and potentially provide liquid returns for the venture capitalists who have put $43 million into the company since its founding in 2005.
“I’m extremely proud that an Accelerator company, if this merger closes, will be publicly traded. It will be a first for us,” says Carl Weissman, the founder and CEO of Accelerator, the Seattle-based biotech incubator that started Allozyne. “It’s a real testament to how great the company has done.”
Chhabra, a former dealmaker with Novartis, summed up what it means to Allozyne in a short conference call with investors. “We can now access the public markets to accelerate our strategic plan.”
There are a number of moving parts to the actual deal that were outlined in a statement. Under the deal, Poniard shareholders will issue shares to Allozyne shareholders based on an exchange ratio to be determined when the transaction closes. Allozyne shareholders are expected to own 65 percent of the company, while Poniard shareholders will get 35 percent. Bay City Capital, one of Poniard’s largest shareholders, has agreed to loan the company about $2.4 million at an 18 percent annual interest rate. The board will be composed of four Allozyne directors—Chhabra, Steve Gillis of Arch Venture Partners, Michael Steinmetz of Clarus Ventures, and Carl Weissman of Accelerator/OVP Venture Partners. The board will also include Poniard’s current CEO, Ron Martell, one other director selected by the Poniard board, and one more independent director selected by a majority of the board.
Leerink Swann advised Poniard on the financial aspects of the deal.
For those new to the Allozyne story, the company’s lead drug, AZ-01, is designed to be a long-lasting form of interferon beta, which has the potential to reduce the number of injections that multiple sclerosis patients need to control their disease. The company, based on technology licensed from Caltech, is also working on ways of engineering different properties into protein drugs, like attaching toxins to make them more potent, or devising ways to make them specifically hit two biological targets instead of just one. The company revealed some early-stage clinical trial results for its multiple sclerosis drug in an Xconomy exclusive earlier this year at the JP Morgan Healthcare Conference.
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