Axonyx, TorreyPines to merge, focus on central nervous system therapies

By E. Janene Geiss and Jennifer Lanning Drey

Philadelphia, June 8 - New York-based Axonyx Inc. and private company TorreyPines Therapeutics, Inc. announced Thursday that they have agreed to a merger.

The merger would create a Nasdaq-listed biopharmaceutical company that discovers and develops treatments for central nervous system disorders. The resulting company will be named TorreyPines Therapeutics, Inc. and will be based in San Diego, according to a company news release.

"I believe this transaction is an important value-creating and value-adding event for Axonyx and its shareholders as it brings together two companies with strong and complimentary central nervous system drug portfolios," said Gosse B. Bruinsma, president and chief executive officer of Axonyx, in a company conference call held Thursday.

Under the agreement, unanimously approved by both boards of directors, Axonyx will issue shares to TorreyPines stockholders so that they will own 58% of the combined company and Axonyx stockholders will own 42%.

The percentages will be adjusted if either party out-licenses one or more product candidates prior to closing, officials said.

In addition, TorreyPines' preferred shareholders will receive warrants to purchase combined company shares that, if fully exercised at closing, would give TorreyPines shareholders about 62% of the combined company.

The transaction is subject to Axonyx maintaining certain minimum cash levels as well as certain other customary conditions, including obtaining approval of each company's stockholders.

The transaction is expected to close during the fourth quarter. Upon closing, the company is expected to trade on Nasdaq for which the company has reserved the symbol "TPTX."

TorreyPines' shareholders will gain flexibility from a stronger balance sheet and access to the capital market as well as a more diversified pipeline, said Dr. Neil M. Kurtz, president and chief executive officer of TorreyPines, during the call.

Axonyx's shareholders will also get a broader clinical pipeline that will extend the company's central nervous system franchise into the migraine and chronic pain areas with two novel compounds, Kurtz said.

"As you can see, the individual pipelines are highly complimentary in terms of the disease targets Axonyx was already pursuing," he said.

The combined company will have a diversified central nervous system pipeline with eight pre-clinical or clinical product candidates focused on novel therapeutics for neurological diseases and disorders. The pipeline at closing will include two candidates for pain and six for Alzheimer's.

"We have a large market opportunity with focus on migraine, chronic pain and Alzheimer's disease," said Bruinsma.

"The combined company will be advantageously positioned to pursue additional business development opportunities and most importantly increase shareholder value," he said.

At March 31, the pro forma combined company had more than $80 million in cash.

"In the immediate term, you can expect that we will focus on optimizing the pipeline and aligning our costs," Bruinsma said Thursday.

The companies said they anticipate several key milestones related to their product candidates during the next 12 months.

Those milestones include TorreyPines' lead product candidate for chronic pain, tezampanel, which is expected to enter into a phase 2b clinical trial for the treatment of migraine. Tezampanel is a non-opioid, nonvascular approach to chronic pain.

"We believe tezampanel represents a promising treatment alternative to opioids or narcotic pain relievers since it may potentially avoid significant side effects typically associated with opioids, said Kurtz.

TorreyPines said it expects to file an Investigational New Drug application with the Food and Drug Administration and begin a phase 1 trial for NGX426, an oral prodrug of tezampanel, and a follow-on compound for migraine and chronic pain.

Axonyx said it will complete its ongoing phase 1 trials with Posiphen in development for the treatment of Alzheimer's disease progression.

Data will become available from TorreyPines' phase 1 single-dose study evaluating the company's lead Alzheimer's product candidate, NGX267, a muscarinic or M1 receptor agonist, in healthy elderly volunteers.

In addition, the company said it anticipates starting a phase 1 multiple dose trial with the compound.

Axonyx said it is ready to begin a phase 1 clinical trial with BNC, its highly selective butyrylcholinesterase inhibitor for the treatment of severe Alzheimer's.

The combined pipeline also includes Phenserine, Axonyx's lead compound for Alzheimer's, which is in phase 3 clinical development. The combined company plans to make Phenserine available to third parties for licensing, officials said.

Following the closing of the transaction, Kurtz will become president and chief executive officer of the combined company. The combined company's board of directors is expected to consist of a total of five current TorreyPines directors and three current Axonyx directors.

Piper Jaffray & Co. served as financial adviser to TorreyPines. Banc of America Securities LLC served as financial adviser to Axonyx.

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