Manhattan Pharmaceuticals to merge with Ariston Pharmaceuticals

Mar 12 2010

Manhattan Pharmaceuticals, Inc. (OTCBB:MHAN) today announced it has entered into a definitive agreement and plan of merger and completed the merger transaction with Ariston Pharmaceuticals, Inc., a privately-held, specialty pharmaceutical company. As a result of the merger, Ariston became a wholly owned subsidiary of Manhattan Pharmaceuticals.

Under the terms of the merger agreement, Manhattan Pharmaceuticals, upon the closing, issued 7.06 million shares of its common stock to Ariston stockholders and debt holders (which represents approximately 6% of Manhattan Pharmaceuticals common stock on an issued and outstanding basis). Under the terms of the merger agreement, Manhattan Pharmaceuticals could issue up to an additional 24.74 million shares upon completion of certain development milestones relating to the Ariston product candidates. If all the product development milestones are reached, former Ariston stockholders and debt holders will own 22% of Manhattan Pharmaceuticals common stock on a currently issued and outstanding basis.

In addition, Manhattan Pharmaceuticals has reserved 43.63 million shares of its common stock for the possible future conversion of $16.45 million of Ariston's outstanding convertible debt. The debt holders have no recourse to Manhattan Pharmaceuticals for repayment. They do have the right to convert their notes into shares of Manhattan Pharmaceuticals common stock.  

Assuming all Ariston product candidate development milestones are reached, and if all of Ariston's convertible debt converts into Manhattan Pharmaceuticals common stock, Manhattan Pharmaceuticals could ultimately issue a total of 75.4 million shares to the Ariston stockholders and debt holders. For the complete terms of the merger agreement, including an explanation of the Ariston product candidate development milestones, please see Form 8-K to be filed on or about March 12, 2010.

Senior Management & Board of Directors

In connection with the Ariston transaction, Manhattan Pharmaceuticals will appoint Malcolm Morville, PhD, formerly President and CEO of Ariston Pharmaceuticals, as Executive Chairman of Manhattan Pharmaceuticals. Michael G. McGuinness will remain Manhattan Pharmaceuticals' Chief Operating and Financial Officer and Mary C. Spellman, MD, will also continue to serve as Head of Dermatology and Drug Development. Michelle Carroll will serve as Vice President, Corporate Development.

Following the Ariston transaction, Manhattan Pharmaceuticals expects that its Board of Directors will consist of 7 directors:  Malcolm Morville, PhD and David Shimko, formerly directors of Ariston, Michael G. McGuinness, and Timothy McInerney, Richard Steinhart, Neil Herskowitz, and Douglas Abel, who will remain as Manhattan Pharmaceuticals Directors. Michael Weiser and Malcolm Hoenlein have resigned from the Manhattan Pharmaceuticals board in connection with the Ariston transaction.

Expanded Product Pipeline

With the completion of the Ariston transaction, Manhattan Pharmaceuticals' pipeline has been expanded from two to four product candidates.

Hedrin^® – A novel, non-pesticide treatment for pediculosis (head lice). In the U.S., Manhattan Pharmaceuticals, through a joint venture with Nordic Biotech (the "Hedrin JV"), is pursuing the development of Hedrin as a Class III prescription medical device. The company expects to initiate a pivotal clinical study for Hedrin the second quarter of 2010 and to file a Premarket Authorization with the FDA in 2010. Hedrin is the leading head lice product in Europe. To date it has launched in 32 countries and, according to Thornton & Ross Ltd., has achieved 2008 annual sales through its licensees of approximately $48 million (€35 million) at in-market public prices, garnering approximately 23% market share across Europe. According to the American Academy of Pediatrics an estimated 6-12 million Americans are infested with head lice each year. The Hedrin JV is currently working to commercialize Hedrin in the U.S. and Canada. 

AST-726 – A nasally delivered treatment for Vitamin B12 deficiency. AST-726 has demonstrated pharmacokinetic equivalence to the current gold standard treatment for Vitamin B12 remediation, a marketed intramuscular injection product. The company expects to initiate a pivotal clinical study for AST-726 in 2010. Manhattan Pharmaceuticals believes that AST-726 may enable both a single, once-monthly treatment for maintenance of normal Vitamin B12 levels in deficient patients, and more frequent administration to restore normal levels in newly diagnosed B12 deficiency. Further, the company believes that AST-726 could offer a convenient, painless, safe and cost-effective treatment for Vitamin B12 deficiency, without the need for intramuscular injections. More than 9 million people in the US are deficient in Vitamin B12, indicating substantial market potential for a facile, convenient, safe and effective treatment that can replace the need for painful and frequent intramuscular injections or other less than fully effective delivery forms. The company also believes that substantial market opportunity also exists internationally.

AST-915 – An orally delivered treatment for essential tremor. AST-915 is being studied under a CRADA agreement with the National Institutes of Health and a Phase 1 clinical study is currently underway in essential tremor patients. Essential tremor is the most common involuntary movement disorder, affecting between 0.4 and 5% of the population, with increasing incidence as people age. Essential tremor is characterized by involuntary shaking of the hands, arms, head, voice, and upper body. The most disabling tremors occur during voluntary movement, affecting common skills such as writing, eating and drinking. There is no cure for essential tremor and the currently available drug therapies do not work in certain patients, produce at best a 50% response in others and have significant side effects. Manhattan Pharmaceuticals believes AST-915 may provide a new treatment option for this serious and prevalent disorder. 

GEL – A topical gel for the treatment of mild psoriasis. In 2007, Manhattan Pharmaceuticals developed a topical gel that was used as the placebo in a Phase 2a clinical study versus topical PTH (1-34). This proprietary topical gel showed evidence of psoriasis improving properties and the company believes it may be effective enough to market as an over-the-counter (OTC) treatment for mild psoriasis. The National Psoriasis Foundation estimates that 5-7 million Americans suffer from psoriasis, with approximately 4.4 million being classified as mild. According to Datamonitor, only half of psoriasis sufferers have been formally diagnosed by a physician, therefore, the market could be much larger. Currently there is no cure for psoriasis. There are a number of OTC creams and ointments that reduce inflammation, stop itching, and soothe skin, but none are viewed as particularly effective in treating psoriasis. Manhattan Pharmaceuticals believes this topical GEL may provide a new OTC treatment option for mild psoriasis sufferers. The company also believes that substantial market opportunity also exists internationally.