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Antiviral acquisition
May 2007
by Lisa Espenschade  |  Email the author
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ATLANTA – Inhibitex Inc., in mid-April announced that it entered into a definitive merger agreement with New York-based FermaVir Pharmaceuticals in a strategic transaction designed to rehabilitate Inhibitex's pipeline with antivirals. FermaVir brings to Inhibitex a treatment for shingles expected to enter Phase I clinical trials this year plus preclinical compounds for treating human cytomegalovirus (CMV) disease.

Under the deal, Inhibitex will exchange .55 shares of Inhibitex common stock for each of FermaVir's 20.8 million outstanding shares of common stock. The transaction, which is valued at approximately $24.5 million on a fully diluted basis, when including options and warrants, is expected to close by late July 2007.

Russell Plumb, president and CEO of Inhibitex, says the acquisition arose after pivotal Phase III data for lead compound Veronate, a polyclonal immune globulin for treating staph infections in premature infants, did not confirm Phase 2 results. Like Inhibitex's other programs, Veronate was based on Inhibitex's MSCRAMM technology, so "we were not diversified," says Plumb. "We made a strategic decision after looking at all the data."

Although MSCRAMM—microbial surface components recognizing adhesive matrix molecules—appeared solid as a platform, "we de-emphasized it as the key value driver at the company," says Plumb. Inhibitex also tabled Aurexis, a monoclonal antibody for treating staphylococcus aureus that has gone through Phase II. Inhibitex will now endeavor to partner it.

Antivirals appealed to Inhibitex because they build on its anti-infective capabilities, says Plumb. They are also well understood and require relatively low expenditures. "A lot of companies were getting significantly disproportionate returns for having good early-stage antiviral data," says Plumb. He also believes Inhibitex can bring value to an early-stage company lacking clinical capabilities.

FermaVir saw the attraction. CEO Geoff Henson says the acquisition is a good match for FermaVir, a virtual microcap company that needed more bulk to advance. "They were looking for what we had. We were looking for what they had, i.e. cash, and what I considered a very good development team." Another plus: some members of the development team have antiviral experience. "We felt that this deal was by far the best of the opportunities that we had," says Henson. "None of the opportunities had the opportunity to really push our product forward and get our shareholders a return in the long run. The nice thing about Inhibitex is that they do have a reasonable amount of cash."

The transaction will also significantly enhance Inhibitex's drug discovery efforts. Henson will become Inhibitex's vice president of drug development. FermaVir scientist Chris McGuigan will join the Inhibitex board of directors, and Richard Whitley and Erik de Clercq will join the scientific advisory board. McGuigan and De Clercq, along with Jan Balzarini, discovered FermaVir's antivirals, and de Clercq and Balzarini co-invented tenofovir for treating HIV AIDS.

Plumb believes Inhibitex can bring FermaVir's shingles and CMV drugs to human proof-of-concept within three years thanks to a cash position of $61 million at the end of 2006 and a revenue-generating relationship with Wyeth. Inhibitex is also considering additional antiviral acquisitions to augment its turnaround.
 
"We're very excited. Most biotech companies will stub their toe along the development pathway," says Plumb. "A significant portion of compounds have setbacks or disappointments… we've regrouped." Henson shares Plumb's enthusiasm, "Pushing new compounds into the clinic, compounds which we think could have a real benefit for human health, is really exciting."  
 
Code: E050718

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