Celtic Pharmaceutical fund launches with purchase of Xenova for £20 million

By Jennifer Chiou

New York, June 24 - Newly launched Celtic Pharmaceutical Holdings, LP announced its has agreed to take over Xenova plc for about £20 million, expected to be effective in August.

Celtic Pharmaceutical, a Bermuda-based private equity investment fund, targets small biotechnology companies that have commercially appealing drugs in late Phase II or Phase III clinical development.

The company also plans to purchase Phase III products from biotech companies as well as the geographical rights to some products.

It will fund acquisitions with a combination of equity, mezzanine financing and the securitization of royalties on already licensed products, helping to manage the products through final stages of clinical and regulatory approval.

Subsequently approved products or products unapproved but in the pre-marketing stage will then be auctioned to established pharmaceutical companies.

Managing general partners Stephen Evans-Freke and John Mayo founded Celtic Pharmaceutical, which aims to establish a diversified portfolio of 12 to 18 late-stage drug development programs.

"Celtic Pharma's first acquisition, announced today, is a good example of the type of investment the fund will seek to make," Mayo said in a news release.

"Xenova has several very interesting products for the treatment of cancer and drug addiction. Each product is a novel and commercially attractive opportunity, but which requires significant cash resources and product development expertise to reach the market."

Thus far, investors have committed about $125 million to Celtic Pharmaceutical and the company intends to increase the amount to $300 million by year-end 2005.

"This chronic need for late-stage development financing and management is the gap in the market we are targeting," Mayo added in the news release.

Previously, Evans-Freke was the founder, chairman and chief executive officer of Sugen, Inc., until its $720 million sale to Pharmacia in 1999. Mayo is a former director of S.G. Warburg.

Xenova, a London-based biotechnology company, and Celtic Pharmaceutical Group member Celtic X Licensee have also completed a license agreement for Xenova's nicotine and cocaine vaccines for drug addiction, TA-NIC and TA-CD.

Celtic X Licensee will offer Xenova a secured loan facility of up to $20 million for working capital.

Broadview, a division of Jefferies International Ltd., was adviser for Celtic Pharmaceutical while Lazard advised Xenova.

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