Progen Pharmaceuticals and Avexa agree to merge

Progen will propose to shareholders a A$20 million share buyback option, to be completed prior to the merger. The combined entity will have over A$60 million cash at transaction closing. Shareholders from both companies will vote on the proposed merger in the first quarter of 2009.

Under the terms of the merger implementation agreement, Progen will issue Avexa shareholders one Progen share for every 12.857 Avexa shares. Based on Avexa’s current share price of A$0.105 per share, this ratio implies a value of A$1.35 per Progen share, a premium of 49.6% to the current Progen share price of A$0.90 per share.

The implied value per Progen share of A$1.35 is greater than the expected net cash backing per Progen share of between A$1.10 to A$1.15 per share at transaction closing. The merged entity will therefore be owned 56% by Progen shareholders and 44% by Avexa shareholders.

The merged company will be named Avexa Pharmaceuticals Limited with headquarters in Melbourne, Australia and offices in both Brisbane, Australia and the San Francisco Bay Area.

Justus Homburg, CEO of Progen, said: “This transaction provides a unique opportunity for Progen shareholders to invest in an integrated portfolio with near term milestones that include Avexa’s exciting Phase III program.”

Julian Chick, CEO of Avexa, said: “This merger not only gives the combined company sufficient financial resources to fund Avexa’s Phase III study with apricitabine, it also provides a much broader pipeline for both sets of shareholders. We will not be the first company to jointly harness the therapeutic areas of oncology and infectious disease, as Gilead Sciences, Ardea Biosciences, and Anadys have similar synergistic strategies. As a result, the merged entity will have a higher quality portfolio of opportunities than either company individually.”