Merck and Viralytics announce acquisition agreement, expanding Merck’s leading immuno-oncology pipeline.
Merck, known as MSD outside the United States and Canada, and Viralytics Limited signed a definitive agreement under which it is proposed that Merck, through a subsidiary, will acquire Viralytics, an Australian publicly traded company focused on oncolytic immunotherapy treatments for a range of cancers by way of an arrangement for AUD 1.75 cash per Viralytics share.
The proposed acquisition values the total issued shares in Viralytics at approximately AUD 502 million (US $394 million). The cash consideration of AUD 1.75 per share represents a premium of 160 percent to the one month volume weighted average price (VWAP) of Viralytics shares.
On completion of the transaction, Viralytics will become a wholly owned subsidiary of Merck, and Merck will gain full rights to Cavatak (CVA21), Viralytics’s investigational oncolytic immunotherapy. Cavatak is based on Viralytics’s proprietary formulation of an oncolytic virus (Coxsackievirus Type A21) that has been shown to preferentially infect and kill cancer cells.
Cavatak is currently being evaluated in multiple Phase 1 and Phase 2 clinical trials, both as an intratumoral and intravenous agent, including in combination with Merck’s Keytruda (pembrolizumab), an anti-PD-1 therapy. Under an agreement between Viralytics and a subsidiary of Merck, announced in November 2015, a study is investigating the use of the Cavatak and Keytruda combination in melanoma, prostate, lung, and bladder cancers.
The board of directors of Viralytics unanimously recommended that its company’s shareholders vote in favor of the proposal, subject to there being no superior proposal and an independent expert concluding that it is in the best interest of the company’s shareholders. It is the intention of Viralytics’s directors to vote all the shares of Viralytics held or controlled by them in favor of the move, subject to those same qualifications.
Merck and Viralytics anticipate the transaction will be implemented by the second quarter of 2018. Implementation of the transaction is subject to a Viralytics’s shareholder vote and customary regulatory approvals.
Viralytics’s largest shareholder, Lepu Medical Group, which currently holds voting power in 13 percent of the Viralytics’s shares, has informed Viralytics that it intends to vote the shares it holds in favor of the proposal, in the absence of a superior proposal and subject to the Viralytics directors maintaining their recommendation to vote in favor.
Transaction Terms and Implementation Process
The plan proposes that Merck acquires 100 percent of the issued shares in Viralytics. Implementation will be subject to customary conditions, including Viralytics shareholder approval, court approval, regulatory approval, an independent expert concluding, and continuing to conclude, that it is in the best interest of shareholders, and no material adverse change or prescribed event occurring.
The agreement contains exclusivity provisions that are customary in Australia, including “no shop,” “no talk,” and “no due diligence” provisions, a break fee, as well as a notification obligation and matching right. The “no talk,” “no due diligence,” and notification obligation provisions are subject to the directors’ fiduciary obligations.
A booklet is expected to be dispatched to Viralytics shareholders in April 2018. It will contain information relating to the plan, the independent expert’s report on whether it is in the best interests of Viralytics shareholders, the reasons for the directors’ unanimous recommendation, and details of the meeting and other matters relevant to Viralytics shareholders’ vote.
A number of expected key dates relevant to the proposed acquisition have been outlined below.
|Key milestones||Date (AEDT)|
Announcement of the proposed acquisition
February 21, 2018
|First court hearing||April 23, 2018|
|Booklet dispatched to Viralytics shareholders||April 27, 2018|
|Viralytics shareholder meeting to approve the plan||May 28, 2018|
|Final court hearing||June 4, 2018|
|Implementation date||June 20, 2018|
Credit Suisse Securities (USA) LLC is serving as financial advisor to Merck, and Baker & McKenzie is serving as Merck’s legal counsel. Lazard is serving as financial advisor and McCullough Robertson is serving as legal counsel to Viralytics.
(Source: Merck & Co., Inc.)
Filed Under: Drug Discovery