Pharmos lowers shares, ups cash payment in acquisition of Vela

By Jennifer Chiou

New York, Sept. 5 - Pharmos Corp. said it signed a definitive agreement that includes revised terms for the acquisition of Vela Pharmaceuticals Inc.

The number of Pharmos shares to be issued to Vela shareholders at closing has been reduced to 6.5 million from 11.5 million shares while cash payable at closing has been increased to $6 million from $5 million, according to a news release.

The company added that the revised agreement also includes additional performance-based milestone payments in connection with the development of Vela's lead drug, dextofisopam, for the treatment of irritable bowel syndrome.

Pharmos noted that, following discussions with a former dissident shareholder, Lloyd I. Miller, III, the shareholder agreed to support the Vela transaction as amended.

Pharmos said it expects to complete the acquisition in late September or early October.

Under the revised terms, upon enrollment of the first patient in dextofisopam's phase 2b trial, Pharmos will pay $1 million in cash and upon enrollment of the final patient in dextofisopam's phase 2b trial, the company will pay $1 million in cash and issue 2 million shares.

Also, upon successful completion of the phase 2b trial, Pharmos will pay $2 million in cash and issue 2.25 million shares and upon the filing of a New Drug Application for dextofisopam, Pharmos will pay $2 million in cash and issue 2 million shares.

Upon FDA approval of dextofisopam, Pharmos will pay $2 million in cash and issue 2.25 million shares and upon receipt of approval to market dextofisopam in Europe or Japan, Pharmos will issue 1 million shares.

Upon achievement of $100 million in sales of dextofisopam during any 12-month period, Pharmos will issue 4 million shares.

Pharmos added it will reimburse Vela monthly for its operating expenses incurred since July 1.

"The completion of the Pharmos-Vela transaction creates a stronger platform on which to expedite our business strategy to develop Pharmos into a progressive specialty pharmaceutical company," Pharmos president and chief operating officer Alan L. Rubino said in the release.

"Dextofisopam is a promising drug for the treatment of irritable bowel syndrome, a prevalent disorder that affects up to 15% of the adult population. With the close of this acquisition, we expect to focus on moving dextofisopam to a phase 2b trial."

Based in Ewing, N.J., Vela is a privately held company specializing in the development of medicines related to the nervous system.

Pharmos is an Iselin, N.J., biopharmaceutical company focused on neurological and inflammatory disorders.

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