The U.S. biopharmaceutical company Hyperion Therapeutics agreed Thursdayto buy Israel’s Andromeda Biotech, a developer of a new diabetes drug, in a deal that could be worth close to $600 million.
Clal Biotechnology, Andromeda’s parent company, will be paid $12.5 million in cash and nearly 313,000 shares of Hyperion stock, valued today at $7.85 million, when the deal is closed, which is expected to be by the end of this quarter, June 30, Hyperion and Clal said in separate statements. In addition, the agreement calls for Hyperion to make milestone payments of $120 million, the first of which will be paid after the first marketing application filing for review is accepted by regulatory authorities in either the United States or Europe.
Shares of Clal Biotechnology ended down 6.5% in Tel Aviv Stock Exchange trading Thursday, to close at 11.40 shekels ($3.28). Investors were apparently disappointed at the small cash advance Clal will be getting for Andromeda as well as some disappointment over the buyers, a relatively small company in the drugs sector with a market capitalization of just over $500 million.
Andromeda is developing DiaPep277, a treatment for Type I diabetes. DiaPep277 is currently undergoing a second advanced Phase III clinical study, with results expected in the first quarter of 2015.
“The acquisition of Andromeda Biotech is a transformative event for Hyperion,” said CEO Donald Santel.
“We believe DiaPep277 has the potential to become a highly differentiated, first-in-class medicine for an orphan indication with a significant unmet need.”
Once the drug hits annual global sales of $450 million, Hyperion would pay up to another $430 million in commercial milestones. It would also pay as much as 17% in contingent sales for annual worldwide sales above $1.2 billion, Hyperion said.
Hyperion already sells Ravicti, a drug that helps those with urea cycle disorder.“DiaPep277 adds an attractive late-stage asset to our portfolio,” Santel said.
The boards of both companies have approved the deal. Teva Pharmaceutical Industries will collect payments of up to $72 million from the proceeds of the deal, under an agreement signed in February when it sold its rights to DiaPep277.
Hyperion said its payroll would rise by 10 employees once the deal is competed.
Yoram Gabison contributed to this report.