Innovate Merging With Israel's RDD Phama to Focus on GI Diseases

Raleigh clinical-stage pharmaceutical developer Innovate Biopharma is merging with Israel-based RDD Pharma to create a new company, 9 Meters Biopharma.

After a stock deal that includes a concurrent cash investment of up to $25 million from Optimed, the combined company will focus on developing urgently needed treatments for specialty, rare and orphan patient populations with gastrointestinal diseases. 

"With a diversified pipeline of novel compounds, active clinical studies - including the first-ever drug to enter a Phase 3 registration trial in celiac disease - 9 Meters Biopharma (9 meters is the approximate length of the digestive tract) expects to deliver multiple value creating milestones over the next 24 months," said John Temperato, the current CEO of RDD, announcing the deal.  

Temperato will become the CEO of 9 Meters Biopharma, and the company will be headquartered in Raleigh. Temperato was instrumental in the commercial and operational buildout of Salix Pharmaceuticals, also focused on GI treatments, which culminated in Salix's acquisition for $16 billion in 2015.

In an interview with the Biotech Center, Termperato said that prior to its sale, Salix had looked “long and hard” at Innovate’s compounds and found them interesting and compelling. He noted that the combined company will be based in the Triangle because “It’s a great place to recruit people to, but a hard place to recruit people from, because they don’t want to leave.”

People are waiting for treatment options

Innovate, a small public (NASDAQ:INNT) company, has focused on developing novel therapeutics for autoimmune and inflammatory diseases. RDD is a startup focused on orphan and innovative therapies for gastrointestinal disorders.

The two companies entered into a definitive merger agreement in which Innovate agreed to acquire all of the outstanding capital stock of privately-held RDD in exchange for a combination of common and preferred shares.

“People living with gastrointestinal (GI) diseases, such as celiac disease, are waiting for treatment options,” Nissim Darvish, M.D., Ph.D,  a member of the board of directors of RDD and senior managing director of OrbiMed Advisors, a lead investor in the transaction, said.

 "The proposed merger will create a powerful platform company with a pipeline of late development-stage therapeutic candidates already demonstrating proof of concept. We are excited about our investment and future involvement in this new company and the opportunities it presents."

A new chapter for gastrointestinal disease therapies

Termperato said the newly formed entity will look to in-license additional products at or near proof of concept. “I have deep expertise in licensing, development and commercialization. There is no end to opportunities in compelling molecules, but you have to balance the opportunities with the burn it takes to develop them and get them approved. But we plan to do meaningful science.”

"The merger of Innovate and RDD to create 9 Meters Biopharma represents a bold new chapter in drug development for GI diseases and is a transformative deal for Innovate shareholders with tremendous benefits,” said Sandeep Laumas, M.D., executive chair of Innovate, in the announcement.

He added, “The merger attracts a highly seasoned board and management team led by a proven CEO, fundamentally driven healthcare-dedicated institutional investors and a shared vision to build a truly world-class platform biopharmaceutical company, which can be the partner of choice for near-term business development opportunities as well, jump-started with an exciting clinical pipeline," 

Following completion of the merger, the former Innovate stockholders will own up to approximately 58.5 percent of the combined company's capital stock and the former RDD stockholders will own at least 41.5 percent of the combined company's capital stock (on a fully diluted basis). 

The actual allocation is subject to adjustment based on the final capital invested concurrent with the closing of the merger of an investment up to $25 million with an initial tranche of $10 million. If RDD commits to a $25 million investment, its stock share in the deal will rise to 49 percent, Temperado explained.

He said the merger, which requires some Israeli considerations, should be complete by the end of the year.

The company will continue trading on the Nasdaq market under the new ticker symbol NMTR.