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Merck
is to acquire venture-backed NovaCardia Inc for $350 million, adding a promising
new cardiovascular drug to its inventory. In an all-stock deal, San Diego-based
NovaCardia''s venture backers will get Merck shares, rather than having to take
NovaCardia public in an uncertain biotech initial public offering (IPO) market.
The number of
shares NovaCardia investors get will be based on the average closing price for
the five days leading to the closing of the deal, expected within 45 days. Merck
shares closed up $1.66 or 3.2 per cent to $53.38, after the deal was announced
on 25 July. NovaCardia
CEO Randy Woods joked that he was responsible for the rise in Merck''s share price,
but that: "I''d rather see it go down at this point." NovaCardia''s backers
preferred a stock swap because of better tax treatment if the stock is held for
a year. While
Woods owns 3.9 per cent of the company, its largest shareholder — with 25
per cent — is Domain Associates LLC of Princeton, New Jersey, whose partner
Eckard Weber founded NovaCardia around the molecule KW-3902, which was sitting
idle at Japanese firm Kyowa Hakko Kogyo. NovaCardia developed it as a treatment
for kidney dysfunction associated with congestive heart failure. KW-3902,
is in Phase 3 clinical trials. Woods said that NovaCardia was prepared to take
the drug to market by late 2009, and build a small sales force to target acute
care and hospital settings. The company plans to spin off a new corporate entity
for clinical development of its second compound, K201 (JTV-519), for atrial fibrillation
and arrhythmia. Woods believes NovaCardia''s investors will "most likely"
back the spin-off, adding that his participation will be decided in the next few
weeks.Once
labelled as a blue-blooded chip, Merck — not unlike other big drug companies
- is under pressure as generics threaten profits and R&D costs spiral. The
present deal allows it to add a potential money-spinner to its stable. Merck
said that for the second quarter of 2007 it had sales of $6.1 billion, up 6 per
cent over the previous Q2 period and a 12 per cent jump in income, at $1.67 billion,
compared with $1.5 billion a year earlier.
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