Shares of Opexa Therapeutics Inc. (OPXA) nearly doubled in early trading Monday, July 3 after the company announced it would be merging with privately-held Acer Therapeutics Inc. After the initial spike, Opexa shares dropped back some and were trading at $1.08, through mid-morning, up 43 cents or roughly 66%.
The combination of the companies was announced Friday. After consummation, Opexa's name will be changed to Acer Therapeutics Inc.
In conjunction with the merger, an investor syndicate led by TVM Capital Life Sciences and comprised of existing Acer investors and new investors has committed to invest approximately $15.7 million in Acer. The financing includes a conversion of about $5.7 million in outstanding convertible notes.
At the closing of the merger, each outstanding share of Acer common stock will be converted into the right to receive approximately one share of common stock of Opexa. The amount of Acer shares to be converted will be set before closing of the merger to account for any additional shares Acer may issue before closing and for Opexa's net cash balance at closing.
After the merger stockholders of Acer, including new investors in the $15.7 million financing, are currently expected to hold approximately 88.8% of the merged company's outstanding common stock, with current Opexa shareholders expected to own the remaining 11.2%.
Shareholders of Opexa and Acer must approve the transaction.
After the merger Opexa's board is expected to consist of seven members designated by Acer.
At the time of the merger all outstanding stock options of Opexa will be canceled and extinguished without any right to receive any consideration.
Prior to Acer's entry into the merger agreement, certain existing shareholders of Acer as well as prospective investors in the company, entered into a subscription agreement in which immediately prior to the consummation of the merger, in which they agree to acquires shares of Acer's common stock for an aggregate purchase price of approximately $15.7 million.
"Acer's goal is to become a leading pharmaceutical company that acquires, develops and commercializes therapies for the treatment of patients with serious rare diseases with critical unmet medical need," said Chris Schelling, Chief Executive Officer and founder of Acer.
Acer is focused on developing its lead candidate Edsivo, a potentially life-saving therapy for patients with Vascular Ehlers-Danlos Syndrome (vEDS).
The condition vEDS is characterized by thin, translucent skin; easy bruising; and arterial, intestinal, and/or uterine fragility. Consequences include vascular dissection or rupture, gastrointestinal perforation, or organ rupture in the majority of adults with the condition.
Women with vEDS who become pregnant have an estimated 5.3% risk for death from peripartum arterial rupture or uterine rupture. One fourth of individuals with vEDS experience a major complication by age 20 years and more than 80% by age 40 years. The median age of death is 50 years.
Schelling said the proceeds from the financing would allow the company to advance Edsivo through a new drug application submission with the Food and Drug Administration in the first half of 2018. Being a public company will allow the company to engage with a broader pool of investors as Acer tries to advance and expand its pipeline, he said.
Neil K. Warma, Opexa's Chief Executive Officer said the company chose to combine with Acer following "an extensive review" of strategic alternatives. Edsivo, he observed, could be on the market within the next two years. "This factor, together with Acer's strategic vision, pipeline, the recently secured financing and Acer's strong management team, provides Opexa shareholders with an opportunity for growth in the value of their shares," Warma said.
Opexa began reviewing strategic options following the October announcement of disappointing results from the Phase 2b clinical trial of its lead product candidate Tcelna in patients with secondary progressive multiple sclerosis.
The directors and the sole executive officer of Opexa will resign from their positions upon the closing of the proposed merger, and the combined company will be under the leadership of Acer's current executive management team with Schelling serving as CEO. The corporate headquarters will be located in Cambridge, Massachusetts.
Piper Jaffray & Co. is acting as placement agent for Acer in the concurrent financing. Pillsbury Winthrop Shaw Pittman LLP served as legal counsel to Opexa and Foley Hoag LLP served as legal counsel to Acer.