Monday Deal Review - July 14, 2014

Welcome to your Monday Biotech Deal Review for July 14th, 2014!

After a shortened week in both the US and Canada, things have picked up nicely in both the M&A and financing spaces, with Resverlogix, Spectral Diagnostics, Immunotec, Merus Labs, Helix BioPharma, Valeant and Knight each making news.   For details on these companies as well as many more, keep on reading!

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announced it has completed the previously announced acquisition of PreCision Dermatology, Inc.

Nordion Inc. (TSX: NDN)(NYSE: NDZ) announced that on July 10, 2014 the Federal Trade Commission terminated the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) with respect to Sterigenics’ proposed acquisition of Nordion and the Canadian Competition Bureau issued a no-action letter pursuant to the Competition Act. The receipt of a no-action letter confirms that the Commissioner of Competition does not intend to challenge the proposed acquisition. The transaction remains subject to certain closing conditions, including approval under the Investment Canada Act, and is expected to close in the second half of calendar 2014.

Warnex Inc.(TSX-V: WNX.H) (“Warnex”) announced the completion of its previously announced amalgamation (the “Amalgamation”) with a wholly-owned subsidiary of Diagnos Inc. (“Diagnos”) (TSX-V: ADK). Shareholders of Warnex will receive one common share of Diagnos (a “Diagnos Share”) for each common share of Warnex (a “Warnex Share”) held. Each shareholder of Warnex and of Diagnos will also be entitled receive one half warrant (a “Warrant”) to purchase one Diagnos Share for each Warnex Share or Diagnos Share held. Once issued, each whole Warrant will be exercisable at a price of $0.10 per share for a period of twelve months.

Knight Therapeutics Inc. (TSX: GUD) (“Knight”) announced it has entered into a secured debt agreement to support the acquisition of two newly formed holding companies of which Apicore LLC and Apicore US LLC (collectively, “Apicore”) will be wholly owned operating subsidiaries. The purchase arrangement included a secured loan provided by Knight and Sanders Morris Harris Inc., and an equity investment by Signet Healthcare Partners (“Signet”) for an aggregate amount of US$22.5 million. Medicure Inc. (“Medicure”) acquired a minority interest in Apicore and the founding shareholders of Apicore continue to own a significant minority interest in Apicore. The USD $6.5 million secured loan issued by Knight will bear interest at a rate of 12% per annum and matures on June 30, 2018. In addition, Knight has been issued warrants to acquire a beneficial interest of 8.125% of Apicore. Medicure has the right to acquire all of Knight’s interests in Apicore within the next 3 years for a pre-determined cash amount.

Welichem Biotech Inc. (TSX-V: WBI) (the “Company”) became aware through the issuance of a news release by LR Resources Co., Ltd. (the “Offeror”) that the Offeror has completed its acquisition of an aggregate of 53,816,249 common shares (the “Shares”) of the Company that were deposited and tendered pursuant to the takeover bid (the “Offer”) previously announced by the Offeror. Pursuant to the Offer, the Offeror has acquired the 53,816,249 Shares of Welichem under the Offer at a price of $0.15 per Share. Following the completion of the Offer, the Offeror holds an aggregate of 55,961,924 Shares, which represents approximately 94.1% of the issued and outstanding common shares of Welichem. The Offeror has announced its intention to exercise its right to acquire all of the remaining common shares of Welichem not tendered under the Offer (the “Compulsory Acquisition”) in accordance with the Business Corporations Act (British Columbia). Trading in the Shares on the TSX Venture Exchange has been halted and the Shares are expected to be de-listed in due course.

Merus Labs International Inc.(“Merus” or the “Company”) (TSX: MSL)(NASDAQ:MSLI) announced it has entered into a definitive acquisition agreement with Dacha Strategic Metals Inc. (“Dacha”) (TSX-V:DSM) pursuant to which Dacha will complete the balance of the previously announced investment of at least $11 million in Merus. The acquisition agreement provides that Merus will acquire from Dacha, in exchange for common shares of Merus (“Merus Shares”), a new subsidiary to be incorporated by Dacha (“Newco”) and to which Dacha will contribute a minimum of $6 million cash by way of equity subscriptions. The number of Merus Shares that Dacha will receive in exchange for Newco will equal Newco’s cash on hand at closing divided by $1.70. Upon closing of the transaction, Merus will pay to Dacha a transaction fee, payable in the common shares of Merus based on a price of $1.70 per share, equal to 3.5% of the aggregate value of the Merus Shares exchanged for Newco.

Biosign Technologies Inc. (TSX-V: BIO) (the “Company”) announced that it has completed the previously-announced acquisition of 51% of issued and outstanding shares of Meck Medical GmbH (“MECK”). In connection with the acquisition, the Company has agreed to provide MECK a loan to fund its operations of up to 100,000 Euros per month to a maximum of 2.4 million Euros in the aggregate. MECK is required to have a reserve pool of not less than 50,000 Euros at all times. The loan will bear interest at 5.75% per annum and is repayable based on future MECK profits with maturity in 5 years from the date of the first advance. In connection with the acquisition, MECK has agreed to pay a co-founder a total of 1,000,000 Euros over 8 quarters starting in August 2014 to acquire certain intellectual property. In order to finance the cash portion of the purchase price for the MECK acquisition and related transaction costs, the Company arranged for an arm’s length, unsecured demand loan in the principal amount of 1.2 million Euros, with interest payable at the Bank of England prime rate plus 3% per annum.

Resverlogix Corp. (TSX:RVX) (“Resverlogix”) announced that it has entered into an Amended and Restated Loan Agreement with Citibank, N.A. (“Citibank”) which provides for the existing loan granted to Resverlogix by Citibank to be increased by $30 million to $68.8 million (the “Amendment”). The loan will be repayable upon maturity on August 28, 2017 and may be prepaid in whole or in part without penalty. Interest on the loan will be payable annually in arrears at a rate equal to the per annum Canadian one-year LIBOR swap rate plus 3.14%, to be reset annually. The loan will be secured by an irrevocable $68.8 million Standby Letter of Credit (the “Letter of Credit”) arranged by Eastern Capital Limited (“Eastern”) which will be maintained until maturity of the loan. The closing of the Amendment will be subject to, among other things, customary closing conditions for a transaction of this nature and shareholder approval of the majority of the votes cast by the shareholders of Resverlogix, excluding Eastern, at a special meeting of the shareholders of Resverlogix to be held on August 13, 2014 (the “Meeting”). The Amendment is scheduled to close in August 2014, subject to satisfaction of customary closing conditions and all necessary approvals being obtained.

Spectral Diagnostics Inc. (TSX: SDI) (OTCQX: DIAGF) (the “Corporation” or “Spectral”) announced that both ISS Proxy Advisory Services and Glass Lewis & Co. have endorsed the previously announced non-brokered private placement of the Corporation of up to $18.2 million (the “Proposed Offering”) and recommend that shareholders of Spectral (“Shareholders”) vote “FOR” the Proposed Offering at the upcoming special meeting of Shareholders to be held on July 22, 2014.

Immunotec Inc. (TSXV: IMM), (the “Company” or “Immunotec”) announced that it has filed a preliminary short form prospectus with the securities regulatory authorities in each of the provinces of Canada in connection with a treasury offering of common shares (“Common Shares”) in the capital of the Company (the “Primary Shares”) and a secondary offering of Common Shares (the “Secondary Shares” and collectively with the Primary Shares, the “Offered Securities”) by two selling shareholders of the Company (the “Selling Shareholders”) for gross proceeds of $7 million to $15 million (the “Offering”). Canaccord Genuity Corp. will act as lead underwriter (the “Lead Underwriter”) and Euro Pacific Canada Inc. and Industrial Alliance Securities Inc. will act as co-managers (collectively with the Lead Underwriter, the “Underwriters”) in connection with the Offering. An underwriting agreement for the Offering will be entered into by the Company, the Selling Shareholders and the Underwriters, at the time of filing of the final short form prospectus.

Merus Labs International Inc.(“Merus” or the “Company”) (TSX: MSL)(NASDAQ:MSLI) announced that the Company has completed its previously announced private placement issuance of $10 million of Series A convertible preferred shares (the “Series A Preferred Shares”) to a large Canadian institutional investor. In aggregate, the Company issued 10,000 Series A Preferred Shares at a price of $1,000 per share for total proceeds of $10 million.

Calyx Bio-Ventures Inc. (TSX-V: CYX) (“Calyx”) announced that on April 9, 2014, it was determined that in Calyx’s view, no options for financing Agrisoma Biosciences Inc. (“Agrisoma”) could be found that would be satisfactory to shareholders of Calyx as Agrisoma had not progressed as expected. Calyx waived its pre-emptive rights to allow a third party to finance Agrisoma and on July 2, 2014, Agrisoma completed a financing of $8.0 million dollars of which $4.8 million was advanced to Agrisoma. The remaining $3.2 million will be advanced pursuant to Agrisoma reaching certain milestones. The $8.0 million financing has diluted Calyx’s interest in Agrisoma from 49.96% to approximately 25%. In addition, Calyx had a disagreement with Agrisoma over certain terms in the January 1, 2001 (as amended March 26, 2004) license and sub license agreement between the two companies. Concurrent with the financing, Calyx and Agrisoma entered into an agreement which fully and finally settled all matters relating to the license and sub license agreement with no cash paid nor amounts payable by either party.

Helix BioPharma Corp. (TSX: HBP) announced it has received private placement subscription agreements for common shares and warrants for aggregate net proceeds in excess of CAD5.4 million after expected expenses. The terms of the placement are for the purchase of common shares at $1.60 per share and include one warrant per share at an exercise price of $2.24 and have an expiry of five years from the date of issue.

Arch Biopartners Inc (“Arch” or the “Company”) (CNSX:ACH)(OTCBB:FOIFF) announced it has raised $200,200 via a non-brokered private placement of 715,000 Units at a price of $0.28 per Unit. Each Unit comprises of one common share and one common share purchase warrant. Each warrant allows the holder to purchase an additional common share at $0.50 cents during the 24 month period following the close of the private placement. The Company now has 50,349,679 common shares outstanding.

Medicure Inc. (the “Company”) (TSX-V: MPH)(OTCQB: MCUJF) announced that the Company has entered into shares for debt agreements with its Chief Executive Officer, Dr. Albert Friesen and certain members of the Board of Directors, pursuant to which the Company will issue 205,867 of its common shares at a deemed price of $1.98 per common share to satisfy $407,616.66 of outstanding amounts owing to Dr. Friesen and members of the Company’s Board of Directors.

Easton Pharmaceuticals Inc. (OTC: EAPH) announced that it has advanced funds and closed on an agreement to invest and purchase an ownership interest in AMFIL Technologies Inc. and The mPact -GROzone Antimicrobial Systems Line of Products. The agreement includes an option to purchase warrants allowing Easton to purchase an additional ownership interest up to 32.5% of AMFIL.

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announced it has completed the sale to Galderma of all rights to Restylane, Perlane, Emervel, Sculptra, and Dysport owned or held by Valeant for $1.4 billion in cash, pursuant to the previously announced agreement with Nestle S.A, which recently completed its acquisition of Galderma.

Axxess Pharma Inc. (PINKSHEETS: AXXE) announced through its wholly-owned subsidiary AllStar Health Brands Inc. that it has received an additional purchase order from the Army Air Force Exchange Service (AAFES). The prior purchase order was valued at almost $30,000.

Neovasc Inc. (“Neovasc” or the “Company”) (NASDAQ: NVCN) (TSX-V: NVC) has been made aware of a stay in proceedings in one of Neovasc’s European patent applications based on a lawsuit filed by CardiAQ Valve Technologies (“CVT”) against Neovasc in Germany. CVT has yet to serve Neovasc with official notice for this lawsuit or for their previously press released lawsuit filed in the United States in early June. Neovasc strongly believes that CVT’s accusation – that Neovasc misused some unspecified, allegedly confidential CVT information arising from the parties’ brief business relationship in 2009-10 – has no merit. Neovasc’s patent prosecution and litigation teams will respond if and when the CVT complaints are served and as otherwise appropriate.

Microbix Biosystems Inc. (TSX: MBX) announced it has commenced a new patent litigation in the Court of Dusseldorf, Germany against Novartis Vaccines and Diagnostics, alleging infringement of its VIRUSMAX® patent in Europe. Microbix filed its first complaint against Novartis in the Eastern District of Texas on January 6, 2014, alleging infringement of its VIRUSMAX® patent in the United States. Microbix successfully defended its European VIRUSMAX® patent against Novartis’ Opposition at the European Patent Office in January 2014 when, following a hearing in Munich, the Office rendered a decision in favour of Microbix. Novartis has now appealed that decision. Microbix was also granted patents for the VIRUSMAX® technology in twenty-one countries between 2006 and 2011.

Focal Healthcare (Focal) was founded as a spin-off company out of the Centre for Imaging Technology Commercialization (CIMTEC). Focal is developing and marketing MRI-Ultrasound Fusion Biopsy and Therapy systems that have strong potential to become the new “gold standard” in prostate care by capitalizing on CIMTEC’s unique intellectual property, as well as its extensive technology development and commercialization expertise in the medical imaging field.

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