Kitov Pharma Ltd agreed to buy privately held biopharmaceutical company FameWave Ltd. for $10 million in newly issued American depositary shares priced at $1.23 apiece along with a 50% warrant coverage.
The warrants will have a four-year term and can be exercised for $1.98 per ADS. Additionally, Kitov will give FameWave a loan of about $2 million to pay to Merck & Co. Inc. or to repay loans provided by FameWave's shareholders.
The shareholders of both Kitov and FameWave have approved the transaction. Tel Aviv, Israel-based Kitov expects to close the transaction during the third quarter, dependent on approval from its shareholders, Merck returning the rights to cancer drug candidate CM-24 to FameWave, finalization of a joint collaboration agreement for a phase 1/2 study of CM-24 in early 2020, and other conditions.
Merck stopped work on CM-24 as it showed no signs of efficacy in a phase 1 clinical trial that studied the drug alone and in combination with Merck's Keytruda for the treatment of advanced or recurrent malignancies. Merck is returning the rights to CM-24 to former shareholders of its unit cCAM BioTherapeutics Ltd. and founders of FameWave.
Under the agreement, failing to close the transaction will require FameWave to repay loans granted by Kitov from the commercialization of CM-24. In case there is no commercial activity for CM-24 within 36 months of the deal, Kitov will be entitled to 20% of FameWave.
If FameWave fails to finalize the joint collaboration agreement or other closing conditions to be completed by its shareholders, Kitov will be entitled to 100% of FameWave in exchange for an earlier loan of about $2 million.
As part of the agreement, OrbiMed Advisors LLC, Pontifax Ltd. and Arkin Holdings, who collectively hold about 90% of FameWave, will purchase Kitov's ADSs worth $3.5 million at $1.23 apiece. After the investment, Orbimed, Pontifax and Arkin Holdings will each own about 10% stake in Kitov.
Kitov plans to start a phase 1/2 study of CM-24 in combination with a PD-1 protein inhibitor in early 2020 to evaluate the safety and efficacy of the cancer drug.