Welcome to your Monday Biotech Deal Review for August 22, 2011. This week’s deal review is brought to you by Norton Rose OR LLP articling student Keldeagh Lindsay, who will be with us during his articles and assisting in the deal review. Steven Zuccarelli has done a great job over the summer, and we wish him well in his final year at law school.
There has been quite a lot of activity over the previous two weeks, with significant equity investment activity, debt financings (public and private), and mergers and acquisitions on the go. Read on to learn more.
M & Eh
QHR Technologies Inc. (TSXV: QHR) has announced the completion of its acquisition of EMIS Inc.’s assets. Pursuant to the agreement, QHR has purchased all of the physical assets, computers and datacenter, equipment, client contracts and a fully paid perpetual license of the software and other related Intellectual Property. QHR has also announced that it has issued a Demand Notice to Healthscreen Solutions Inc. pursuant to the debentures under which Healthscreen is indebted. Healthscreen has 20 days to satisfy its obligations.
Valeant Pharmaceuticals International, Inc. (NYSE: VRX) has completed its previously announced acquisition (covered here) of AB Sanitas (NASDAQ OMX: SAN1L).
Atrium Innovations Inc. (TSX: ATB) has announced the acquisition of Enzimas S.A., an Argentinian manufacturer of Trypsin and Chymotrypsin enzymes. Atrium acquires a manufacturing facility and process that is approved by various regulatory bodies. The transaction is supported by a potential return on investment based on anticipated manufacturing cost savings.
Paladin Labs Inc. (TSX: PLB) has entered into an agreement to acquire all issued and outstanding common shares of Labopharm, at $0.2857 per share (a 57.4% premium). The agreement has been approved by Labopharm’s board, although completion is subject to court and shareholder approval. Labopharm is subject to customary non-solicitation covenants, and Paladin has the right to match any unsolicited superior acquisition proposal. In certain circumstances, termination by Labopharm will result in a $750,000 fee payable to Paladin.
Afexa Life Sciences Inc. (TSX:FXA) has been advised that Paladin Labs Inc. has filed documents with Canadian securities authorities formally commencing an unsolicited tender offer to acquire all of the outstanding common shares of the Company for either cash consideration of Cdn $0.55 per common share or 0.013 of a Paladin share for each common share. The company’s board believes the Paladin (TSX:PLB) offer significantly undervalues Afexa’s business. The board has established a special committee of the board to review the offer.
Cynapsus Therapeutics Inc. (TSXV: CTH) has announced that it intends to proceed with the previously announced acquisition of Adagio Pharmaceuticals Ltd. (covered here) and conduct a Series E Debenture financing.
Medifocus Inc. (TSX-V:MFS) has completed its previously announced private placement offering of 1,000,000 common shares at a price of $0.30 per share for gross proceeds of $1,000,000. Shares issued in connection with the private placement will have a hold period inCanada untilDecember 12, 2011. The net proceeds of this offering will be primarily used by Medifocus to initiate a pivotal phaseIII clinical trial using its MicrofocusAPA 1000 System for the treatment of breast cancer (including all related professional expenses) and for working capital. Medifocus has also agreed to a debt settlement with certain third party creditors, employees and service providers. Subject to approval by the TSX Venture Exchange, Medifocus will issue an aggregate of 4,042,615 common shares at an average deemed price of $0.66 per common share to settle such outstanding debts.
Neovasc Inc. (TSXV: NVC) has completed a previously announced non-brokered private placement (covered here) of 4,720,500 ($1) units for a total of $4,720,500. Each unit is comprised of one common share and a (2-year, $1.25) one-half warrant. Proceeds will be used to complete the COSIRA clinical trial, which is designed to provide randomized, controlled safety and efficacy data for the Neovasc Reducer™, an innovative implantable product for treating refractory angina, as well as to advance Neovasc’s Tiara™ project to develop a novel medical device to treat heart disease.
Gemoscan Canada, Inc. (CNSX: GES) has announced plans to issue 2,857,143 ($0.35) units in a non-brokered private placement. Each unit consists of one common share and one-half of one (2-year, $0.55) warrant. Gross proceeds of up to $1,000,000 will be used to enhance cash on hand and strengthen Gemoscan’s working capital position. Gemoscan currently has 20,990,005 common shares outstanding.
Lorus Therapeutics Inc. (TSX:LOR) has completed the previously announced unit offering of 5,484,000 ($0.40) units (covered here), for gross proceeds of approximately $2.2 million. Each unit is comprised of one common share and one (5-year, $0.45) warrant. The warrants have a 30-day acceleration clause if the 10-day average trading price equals or exceeds 200% of the exercise price. A director of Lorus participated in the offering, and has committed to providing $1.8 million to Lorus by way of equity investment or promissory note in the event that the offering falls short. Proceeds are to be used to further advance its anti-cancer drug candidate LOR-253 to the end of a Phase I clinical trial, and for working capital and general corporate purposes.
Shares for Debt
PharmaGap Inc. (TSXV: GAP) has issued 1,807,766 ($0.0945) common shares to three directors and founders of the company, in satisfaction of bonuses, salary accrual and severance amounts owed to them.
Atrium Innovations Inc. (TSX: ATB) has closed its previously announced bought deal public offering of $75,000,000 aggregate principal amount of 5.75% convertible unsecured subordinated debentures, due August 31, 2018 at a price of $1,000 per debenture. Each debenture will be convertible at the holder’s option into common shares of Atrium at a conversion price of $24.60 per share subject to adjustments in certain circumstances. Atrium has granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days following closing, pursuant to which the underwriters may purchase up to an additional $11,250,000 principal amount of debentures, on the same terms. Atrium also announced today that its previously announced private placement of $25,000,000 aggregate principal amount of debentures with the Fonds de Solidarité FTQ was closed on the same terms as the public offering, except that debentures sold under the private placement will be subject to a four-month hold period. All of the net proceeds from the Public Offering and the Concurrent Private Placement will be used to reduce Atrium’s outstanding indebtedness, including to fully reimburse the subordinated debt held by FTQ for a principal amount of $13,407,000.
5N Plus Inc. (TSX: VNP) has closed a new, four-year $250 million senior secured multi-currency revolving credit facility to replace its existing $50 million two-year senior secured revolving facility with National Bank of Canada, to be used to refinance existing indebtedness and for other corporate purposes. 5N Plus has the option to request that the facility be expanded to $350 million by exercising an accordion feature.
Warnex Inc. (TSX:WNX) has announced the closing of its previously announced debenture restructuring (covered here). Debenture holders have agreed to postpone until September 30, 2011 the payment of interest accrued from April 1, 2011 to June 30, 2011. Warner took advantage of financial hardship exemptions to avoid valuation, minority approval, and shareholder approval for the transaction.
Licensing & IP Acquisition
Covalon Technologies Ltd. (TSXV: COV) has announced a multi-year distribution agreement with a Canadian distributor to export and distribute ColActive® Plus Ag collagen wound care dressings in the Middle East. The agreement contains a minimum order of $700,000 in the first year and a total minimum purchase commitment of approximately $11.2 million over five years.
biOasis Technologies Inc.’s (TSX-V:BTI) wholly owned subsidiary biOasis Advanced Technologies Inc. has completed the acquisition of certain Intellectual Property pursuant to a Worldwide Assignment dated June 16, 2011 on terms as previously disclosed. OnAugust 5, 2011, the closing date, the company paid $25,000 in cash and issued 350,000 warrants at an exercise price of $0.575 and 100,000 warrants at an exercise price of $0.50. Each warrant is exercisable into one common share of the company for a period of five years from the date of issuance. All of the warrants issued are subject to a hold period expiringDecember 6, 2011. In the event that a patent with respect to the IP is issued to biOasis Advanced Technologies Inc. in either Europe or the United States of America, the company will grant a further 300,000 warrants. These further warrants shall be priced at the closing share price of the company on the date of the issuance of such patent and in any case not less than $0.50 and shall be exercisable into one common share of the Company for a period of two years from date of grant.
Roche Canada has announced an investment of over $190 million over the next five years in a global development site, bringing 200 highly-skilled and specialized jobs to Mississauga, in partnership the Ontario Ministry of Economic Development and Trade, to manage operations for all stages of global clinical trial research.
Other Corporate Announcements
Medifocus Inc. (TSX-V:MFS) will be subject to a 15 day cease trade order effective August 4, 2011. The order was issued by the Ontario Securities Commission as a result of the company not filing its annual financial statements for the year endedMarch 31, 2011 and related annual filings by the filing deadline ofJuly 29, 2011.
Functional Technologies Corp. (TSX-V:FEB) has granted stock options to its directors for the purchase of a total of 750,000 common shares. The options are exercisable for five years at a price of $0.60 per share. The last grant of options to directors was made in September 2009.
Gemoscan Canada, Inc. (CNSX:GES) will issue shares to a consultant in exchange for the provision of financial and strategic advisory services as part of a services agreement. Pursuant to the terms of the agreement, the corporation will issue the consultant 100,889 Common Shares in at a deemed price of $0.281 per share. The issuance will be effectiveAugust 15, 2011. Following the closing of the shares for services transaction there will be 20,990,005 Common Shares in the capital of the Gemoscan issued and outstanding.
Pivotal Therapeutics Inc. (CNSX:PVO) has announced that The Shoreham Group, LLC will provide investor relations and strategic advisory services. Pivotal’s lead product is a proprietary prescription-grade Omega-3 product, for utility as an aid in the dietary management of Omega-3 deficient cardiovascular disease patients. In consideration, Shoreham will receive a monthly fee-for-service and 100,000 (5-year, $0.30) options.
The board of RXT 110 INC. (CNSX:RXT) has adopted a “rolling” employee stock option plan to issue up options to purchase up to 10% of the Class A shares to eligible employees, officers, directors and consultants. The board has also approved the grant of 1,750,000 (5-year, $0.20) options. 25% vest upon granting, and the remainder in equal installments on the next three anniversaries of the grant date. The plan and grant is subject to shareholder approval.
Spectral Diagnostics Inc. (TSX: SDI) has announced that the proxy firms ISS Canada and Glass Lewis & Co., have both recommended that Spectral shareholders vote for the proposed private placement to Medwell Capital Corp. of 33,333,333 ($0.30) Spectral common shares for total proceeds of $10 million. Spectral’s board has recommended that shareholders vote for the private placement at the August 26, 2011 special meeting.