On August 31, 2016 Sunovion Pharmaceuticals Inc. (Sunovion) and Cynapsus Therapeutics Inc. (Cynapsus) (NASDAQ: CYNA) (TSX: CTH) reported that the companies have signed a definitive agreement under which Sunovion will acquire Cynapsus for US$40.50 per share in cash (Press release, Sunovion, AUG 31, 2016, View Source [SID:1234514849]). The transaction has received unanimous approval by the Board of Directors of both companies and values Cynapsus at approximately US$624 million (or approximately CAN$820 million). The acquisition will be funded with cash on hand. The transaction is expected to close in the fourth quarter of 2016 (third quarter of Sunovion’s fiscal year). This agreement reflects Sunovion’s global strategy to expand and diversify its portfolio in key therapeutic areas, including neurology.
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Through this transaction, Sunovion would acquire Cynapsus’ product candidate, APL-130277, which is designed to be a fast-acting, easy-to-use, on-demand treatment option for managing OFF episodes associated with Parkinson’s disease (PD).
"Parkinson’s disease is a chronic, progressive neurodegenerative disease that affects more than four million people around the world, and there is a significant need for new options to treat the OFF episodes associated with it," said Nobuhiko Tamura, Chairman and Chief Executive Officer, Sunovion. "We believe that APL-130277 is a novel late-stage candidate with the potential to make a real difference for patients and their families."
"The acquisition of Cynapsus is well-aligned with Sunovion’s focus on the innovative application of science and medicine to help people with serious medical conditions and complements our robust product pipeline," added Mr. Tamura. "We have high regard for the Cynapsus team and their work with the APL-130277 program."
"With its leadership in therapies for central nervous system disorders and commercial experience specific to neurology, we believe Sunovion is best suited to advance APL-130277 in the United States and other key markets," said Anthony J. Giovinazzo, President and CEO, Cynapsus. "This transaction culminates years of dedicated work by the Cynapsus team and represents significant value creation for our securityholders."
The board of directors of Cynapsus, after consultation with its financial and legal advisors and based, in part, upon the unanimous recommendation of an independent special committee of the board of directors, has determined that the arrangement is in the best interest of Cynapsus and the consideration to be received by shareholders of Cynapsus is fair to such shareholders. The board of directors unanimously recommends that Cynapsus shareholders and warrantholders vote in favour of the transaction at a special meeting expected to be held on or about October 13, 2016.
The proposed sale of Cynapsus follows a full consideration of alternatives aimed at optimizing shareholder value for the company. "We believe that the proposed transaction with Sunovion results in the best outcome for our shareholders," said Rochelle Stenzler, chair of the board of Cynapsus. "The transaction with Sunovion represents a significant premium to the current share price and we are recommending that our shareholders and warrantholders vote in favour of the transaction."
Pursuant to the terms of the definitive agreement, upon closing of the proposed transaction, shareholders of Cynapsus will receive US$40.50 per common share in cash, and holders of warrants and stock options will receive a cash payment equal to the difference between US$40.50 and the exercise price of such warrant or stock option. The offer of US$40.50 per common share in cash represents a premium of 123 percent based on the volume weighted average closing price of Cynapsus’ common shares on the NASDAQ Global Market for the last twenty trading days. The companies expect to close the transaction following required securityholder, court and regulatory approvals and satisfaction of certain other customary closing conditions.
The transaction will be completed by way of a plan of arrangement under the Canada Business Corporations Act. The arrangement will require approval of at least two-thirds of the votes cast by Cynapsus shareholders and warrantholders voting together as a single class at a special meeting of such securityholders of Cynapsus. Voting and Support Agreements in support of the transaction have been signed by all directors and officers of Cynapsus and the company’s largest shareholder representing in the aggregate, approximately 18.33 percent of the Cynapsus securities entitled to vote to approve the transaction.
Full details of the transaction will be included in the management information circular to be filed with the applicable securities regulatory authorities and mailed to Cynapsus shareholders and warrant holders within approximately two weeks. Assuming receipt of all required regulatory approvals, the parties expect to close the arrangement in the fourth quarter of 2016.
BofA Merrill Lynch serves as financial advisor, and Borden Ladner Gervais LLP and Troutman Sanders LLP serve as legal advisors to Cynapsus. Stifel, Nicolaus & Company, Incorporated serves as financial advisor and Fasken Martineau DuMoulin LLP serves as a legal advisor to the Special Committee of Cynapsus. Nomura Securities International, Inc. serves as exclusive financial advisor, and Goodmans LLP, Reed Smith LLP, and Gibbons PC serve as legal advisors to Sunovion.
Adagio Amending Agreement
Cynapsus and the former shareholders of Adagio Pharmaceuticals Ltd. ("Adagio") entered into a share purchase agreement dated as of December 22, 2011, as subsequently amended as of January 28, 2015 (the "Share Purchase Agreement"), pursuant to which Cynapsus acquired Adagio.
Cynapsus and the former shareholders of Adagio have amended the Share Purchase Agreement to provide, among other things, that if a change of control of Cynapsus, which would include the transaction with Sunovion, occurs before the successful completion and the first public announcement of the top-line data of the Final Safety Study (as defined in the Share Purchase Agreement), the CDN$2,500,000 of the purchase price still potentially payable to the former shareholders of Adagio shall be paid in cash (not common shares, as was originally contemplated in the Share Purchase Agreement) by Cynapsus, on the date on which the change of control transaction is completed.
As Anthony Giovinazzo, President and Chief Executive Officer of Cynapsus, is also a director, officer and majority shareholder of Adagio, the amendment of the Share Purchase Agreement constitutes a related party transaction pursuant to Multilateral Instrument 61-101 and the policies of the TSX. The amendment was necessary, and appropriate, as it ensures that if Sunovion acquires all of the common shares of Cynapsus, it would not have an obligation to potentially issue shares to the former Adagio shareholders post-closing of such acquisition. The amendment was entered into at the same time as the arrangement agreement with Sunovion and therefore was not announced more than 21 days before its execution.
About APL-130277
APL-130277, a novel formulation of apomorphine, a dopamine agonist, is being developed as a fast-acting, easy-to-use, sublingual thin film for the on-demand management of debilitating OFF episodes associated with Parkinson’s disease. Apomorphine is the only molecule approved for acute, intermittent treatment of OFF episodes for advanced PD patients, but is currently only approved as a subcutaneous injection in the United States. APL-130277 is designed to rapidly, safely and reliably convert a PD patient from the OFF to the ON state while avoiding many of the issues associated with subcutaneous delivery of apomorphine. It has been studied in all types of OFF episodes, including morning OFF episodes. APL-130277 is in Phase 3 clinical trials and has not been approved by the U.S. Food and Drug Administration (FDA).
In the ongoing Phase 3 trial, CTH-300, the blinded safety data was corroborated by the DSMB findings, which were announced in the press release dated August 15, 2016. If the ongoing pivotal Phase 3 clinical trials are successful, it is expected that a New Drug Application (NDA) for APL-130277 will be submitted to the U.S. Food and Drug Administration (FDA) during the first half of 2017 under the abbreviated Section 505(b)(2) regulatory pathway. A pivotal European clinical program evaluating the safety and efficacy of APL-130277 in PD patients is expected to be initiated in the fourth quarter of 2016.