@ Tranzyme Pharma and Ocera Therapeutics Announce Merger Agreement | SEBIO

Tranzyme Pharma and Ocera Therapeutics Announce Merger Agreement

Posted by on Apr 30, 2013

RESEARCH TRIANGLE PARK, N.C. — Tranzyme Pharma (Nasdaq:TZYM) (“Tranzyme”), a biopharmaceutical company focused on discovering, developing and commercializing novel, mechanism-based therapeutics, and Ocera Therapeutics, Inc. (“Ocera”), a privately held biopharmaceutical company developing novel therapeutics for liver diseases, today announced that they have entered into a definitive agreement under which Ocera will merge with a subsidiary of Tranzyme in an all-stock transaction. The merger is expected to create a NASDAQ-listed company focused on the development of novel therapeutics for patients with acute and chronic decompensated liver disease, an area of high unmet medical need. Upon closing, the company will be named “Ocera Therapeutics, Inc.” (the “Company”).

Concurrently with the execution of the merger agreement, the Ocera investor syndicate committed to a $20 million PIPE financing for the Company, which will close with the merger. All of Ocera’s largest preferred stock investors, including Domain Associates, Thomas McNerney & Partners, Sofinnova Ventures and InterWest Partners, have committed to participate in the PIPE financing.

“Following an extensive and thorough review of strategic alternatives, we believe the proposed merger with Ocera offers the best value for our stockholders”, said Vipin K. Garg, PhD, Tranzyme’s President and Chief Executive Officer. “We expect the merger will benefit from the substantial synergies of the combined management team’s extensive experience in drug development, specifically in hepatology, which will help accelerate the transition and allow for efficient execution of the development plan.”

Linda Grais, MD, President and Chief Executive Officer of Ocera, stated, “The merger and concurrent financing will allow the Company to continue to advance Ocera’s lead clinicalprogram, OCR-002, a differentiated product candidate for orphan liver diseases currently in Phase 2 development. This product candidate addresses a significant unmet need in the treatment of acute hepatic encephalopathy, and we look forward to the initiation of our Phase 2b trial later this year and additional Phase 2a data in 2014.”

OCR-002 has received Orphan Drug designation in the United States and Europe and has been granted fast track status by the U.S. Food and Drug Administration. We estimate that there are up to one million patients with cirrhosis in the United States, and approximately 150,000 hospitalizations occur annually due to complications of encephalopathy, costing the healthcare system approximately $7 billion every year. For more information about clinical trials related to OCR-002, please visit:www.clinicaltrials.gov.

Details of the Proposed Transaction
On a pro forma basis, prior to the financing transaction discussed below, based upon the number of shares of Tranzyme common stock to be issued in the merger, current Tranzyme shareholders will own approximately 27.4% of the Company and current Ocera shareholders will own approximately 72.6% of the Company. The final number of shares will be subject to adjustments at closing based on each company’s cash levels and other matters at closing. The transaction has been unanimously approved by the board of directors of both companies. The merger is expected to close in the third quarter of 2013,subject to approval by a majority of Tranzyme stockholders, review by the Securities and Exchange Commission and customary closing conditions as detailed in the merger agreement.

Concurrently with the execution of the merger agreement, Tranzyme entered into a securities purchase agreement pursuant to which certain investors agreed to purchase, and it agreed to sell, $20 million worth of its common stock at a price to be determined based on the weighted average trading price of Tranzyme’s closing price for the 10 days prior to the closing of the merger. The securities purchase agreement is conditioned on closing of the merger transaction and customary closing conditions as detailed in the securities purchase agreement, and contains customary representations, warranties, covenants and indemnities.

In connection with the merger, Tranzyme plans to effect a reverse stock split intended to increase its trading price to above the minimum requirements of Nasdaq for allowing the company to remain listed following the transaction. Whether Tranzyme will remain listed following the transaction depends on whether Tranzyme will satisfy all of the applicable Nasdaq requirements.

Stifel served as financial advisor, Goodwin Procter LLP served as legal counsel to Tranzyme and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to the special committee and the board of directors of Tranzyme with respect to the transaction. Reed Smith LLP served as legal counsel to Ocera with respect to the transaction.

Management and Organization
Following the merger, the Company will be headed by Linda Grais, MD, the current President and CEO of Ocera. The corporate headquarters will be located in San Diego, California. Clinical and regulatory operations will be led by Franck S. Rousseau, MD, Chief Medical Officer of Tranzyme, in the existing office in Research Triangle Park, North Carolina. The board of directors will be comprised of representatives from both the existing Ocera and Tranzyme companies, including Drs. Grais and Rousseau.  Upon completion of the merger, Dr. Vipin K. Garg, Tranzyme’s President and CEO willdepart the Company to pursue other interests.

About OCR-002
OCR-002 (ornithine phenylacetate) is an ammonia scavenger designed to treat hyperammonemia and associated hepatic encephalopathy in patients with liver cirrhosis, acute liver failure and acute liver injury. OCR-002, through its dual mechanism of action, directly lowers circulating blood levels of ammonia by enabling alternate metabolic pathways in the muscle and kidney in patients with decompensated liver cirrhosis, and or liver failure from other causes. OCR-002 is being developed as an injectable formulation for hospitalized patients and as an oral formulation to treat and prevent recurrences of hepatic encephalopathy. Hepatic encephalopathy is an often-reversible neuropsychiatric abnormality observed in patients with liver disease; it is marked by a worsening of brain function when the liver is no longer able to remove toxic substances such as ammonia in the blood. Ammonia accumulation in the blood impairs brain cell function. Signs of hepatic encephalopathy include impaired cognition, uncontrolled movements and decreased levels of consciousness leading to coma and death due to brain swelling.

Planning is underway to initiate a Company-sponsored Phase 2b, randomized, double-blind, placebo-controlled, efficacy study of OCR-002 as a treatment for acute hepatic encephalopathy in hospitalized patients with liver cirrhosis. Enrollment is expected to begin in late 2013.  OCR-002 also is the subject of two ongoing, externally-sponsored, Phase 2a studies in patients. Data from these studies are expected in 2014.

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