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QLT to acquire InSite Vision, create ophthalmic specialty company
QLT is set to merge with InSite in an all-stock transaction to form an ophthalmic specialty pharmaceutical company with multiple late-stage pipeline products.
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QLT will acquire InSite Vision in an all-stock transaction that will create an ophthalmic specialty pharmaceutical company, InSite Vision announced.
“As demonstrated by their unanimous approval and support of the transaction, both [InSite Vision and QLT] boards are enthusiastic about charting a new path forward,” Timothy Ruane, CEO of InSite Vision, said in a conference call to announce the intended acquisition. “A new QLT can unlock the potential of both companies’ pipeline assets and create significant shareholder value.”
The newly formed company will have approximately $70 million in cash after closing and completion of other investments and dividends from AzaSite (azithromycin ophthalmic solution) milestones and royalties.
The combination of InSite and QLT will result in a diversified, pure-play, late-stage ophthalmic company that will focus its diversified pipeline on the front of the eye and retinal indications.
InSite also recently filed a new drug application with the FDA for marketing approval of BromSite (bromfenac ophthalmic solution) for the treatment of inflammation and pain after cataract surgery. As a part of the proposed transaction, QLT provided the $2.4 million Prescription Drug User Fee Act fee in order to facilitate its filing.
In addition, both companies started the necessary steps to file in the first half of 2016 a second NDA for InSite Vision’s DexaSite (dexamethasone 0.1% in DuraSite) to treat blepharitis.
QLT plans to continue the rapid phase 3 clinical trial of QLT091001, a retinoid product candidate to treat inherited retinal diseases, for its intended marketing authorization application for conditional approval in 2016.
“The new QLT will have an impressive pipeline with combinations of low-risk and high-upside products, all with impressive exclusivity positions backed by significant patent lives, multiple news flow and value creation events in the near, medium and long term,” Ruane said in the call. “This will be a strong company from both the pipeline and financial point of view.”
The newly formed company will be led through a combined leadership team from both companies in Canada and will retain the name of QLT. QLT will be a dual exchange company listed on both the Nasdaq and the Toronto Stock Exchange.
“As a Canadian domicile company, and with significant Canadian net operating loss and research and development tax credits, the new QLT will have a favorable tax position and thus hold significant strategic flexibility for future partnering and mergers and acquisitions activity,” Ruane said.
InSite Vision shareholders will receive 0.048 QLT shares for each InSite share, representing a 27% premium based on the closing stock prices of both companies on June 5. At close, QLT shareholders will own approximately 89% of the newly formed company, and former InSite shareholders will own approximately 11%.
Current InSite shareholders will have the option to receive cash or newly issued shares subject to proration.
For newly issued shares, the new company will be making a $45 million equity investment in Aralez Pharmaceuticals, which combines Tribute Pharmaceuticals and Pozen. In return, QLT will receive shares of stock that represent approximately 9% ownership and will be distributed to new QLT shareholders.
“We believe this is an excellent and tax-efficient opportunity to participate in the growth of a newly formed, exceptionally managed, commercial-stage Irish-domiciled specialty pharmaceutical company,” Ruane said.
If shareholders opt for liquidity, an investor group will provide a back stock for up to $15 million of new QLT investment.
Additionally, the new shareholders will be issued redeemable convertible notes with an aggregate principal amount of $25 million and a 21-month term starting the third month after issuance.
“This provides [shareholders] essentially a 2-year call option and an ability to play the potential upside in the new QLT stock,” Ruane said. “In summary, these notes will provide [shareholders] the option of near-term liquidity and/or the potential for future capital investment in QLT.”
The combined company’s board will include seats for the CEO of the merged company and one director nominated by InSite.
The transaction has been approved unanimously by both boards and is subject to the approval of InSite Vision shareholders. InSite will file a proxy statement with full disclosure of the transaction, followed by a shareholder vote and meeting.
The transaction is expected to close in the third quarter.
“We believe this is a strategically strong transaction and a good outcome for InSite Vision shareholders, and as such, we look forward to our upcoming shareholder vote and the eventual close of the transaction,” Ruane said. – by Kristie L. Kahl