Lundbeck Gives Chelsea $658M Vote of Confidence
Chelsea Therapeutics is going out with a bang that could be as loud as $658 million.
The Charlotte pharmaceutical company announced today that it has agreed to be purchased by Danish global drug company Lundbeck for up-front cash and milestone payments to shareholders. The total depends on whether Chelsea’s newly approved debut drug meets expectations when it hits the market.
The buyout caps a stellar run for Joseph Oliveto, MBA, since becoming Chelsea’s interim president and CEO in July 2012 and accepting those positions formally in January.2014, along with a seat on the Chelsea board.
Oliveto joined Chelsea following a two-year assignment as Executive in Residence at Pappas Ventures, the Durham-based life science venture capital firm. Prior to Pappas Ventures, he served in a number of progressively senior positions at Hoffmann-La Roche, most recently as the Global Alliance director for Roche's licensing organization.
A Rags to Riches Turnaround
Though the publicly traded Chelsea struggled to win marketing approval from the U.S. Food and Drug Administration for its first product, NORTHERA, that approval came on Feb. 18 under Oliveto’s leadership and put the small 19-employee company on the world stage.
NORTHERA is a treatment for a sudden drop in blood pressure that occurs while standing. The disorder is technically known as symptomatic neurogenic orthostatic hypotension (NOH).
Lundbeck said buying Chelsea will allow Lundbeck to leverage its expertise in rare neurologic disorders in the U.S. through the upcoming launch of NORTHERA, expected before the end of 2014. Lundbeck’s products in the U.S. currently include Onfi, Sabril and Xenazine, and others are in final-stage clinical trials.
Potential Shareholder Windfall of 59 Percent
"This transaction provides attractive and certain upfront value to our stockholders,” said Oliveto in a news release issued by the companies early today, “and enables them to participate in the potential commercial upside of NORTHERA. Lundbeck's expertise in commercializing rare disorder CNS (central nervous system) products will enable a rapid and successful launch of NORTHERA into the U.S. market and ultimately will provide added benefit to patients suffering from NOH."
Chelsea’s stock jumped about 30 percent on the news, from around $5 a share at Wednesday’s close on the Nasdaq exchange to $6.58 at the close today.
Under the terms of the agreement, Lundbeck will commence a tender offer for all outstanding shares of Chelsea, whereby Chelsea stockholders will be offered an upfront payment and contingent value rights (CVRs), representing a total potential consideration of up to $7.94 a share, or $658 million -- a premium of 59 percent.
It breaks down to $6.44 a share in up-front cash, or a total of $530 million. In addition, the CVRs can add $1.50 per share if NORTHERA hits agreed-upon commercial milestones from 2015 through 2017.
Chelsea was founded in 2002 by Simon Pedder, Ph.D., also a former Roche executive, who resigned as president and CEO in 2012. Chelsea licensed the compound in NORTHERA, also called droxidopa, from Japanese drug company Sumitomo Pharma.
Neither company discussed what future plans might be in the works for Chelsea's site and employees in Charlotte.