Cadence Pharmaceuticals to acquire Incline Therapeutics

Cadence Pharmaceuticals, Inc.Jun 22 2010

Cadence Pharmaceuticals, Inc. (Nasdaq: CADX), a biopharmaceutical company focused on in-licensing, developing and commercializing proprietary product candidates principally for use in the hospital setting, announced today that it has signed an agreement providing Cadence with an exclusive option to acquire Incline Therapeutics, Inc., a privately held specialty pharmaceutical company.  

The company simultaneously announced that it has closed a $30 million secured loan facility with Oxford Finance Corporation, Silicon Valley Bank and GE Financial Services, Inc.  

Option to Acquire Incline Therapeutics

Incline is developing IONSYS™ (fentanyl iontophoretic transdermal system), an investigational product candidate intended to provide patient-controlled analgesia for adult inpatients requiring opioids following surgery.  IONSYS is a compact, needle-free, self-contained, pre-programmed system designed to be applied to the skin on the upper arm or chest and activated by patients double clicking a button on the system.  A generally imperceptible electrical current then actively delivers a small dose of the short-acting opioid analgesic fentanyl directly through the skin and into the systemic circulation.  

IONSYS was approved by both the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) in 2006; however, IONSYS is not currently marketed anywhere in the world.  Before this product candidate may be marketed, Incline must obtain regulatory approval from both the FDA and EMA for new patient safety features being developed into the system.

"We believe that this agreement provides Cadence with the opportunity to build our pipeline and strengthen our franchise in the hospital market, while effectively managing our cash," said Ted Schroeder, President and CEO of Cadence.  "This transaction is consistent with our long-standing strategy to focus on products for use in the hospital that we believe have a clear clinical and regulatory path to approval.  If approved, we believe that IONSYS will represent a potentially significant commercial opportunity and be an excellent strategic fit with our OFIRMEV™ (acetaminophen) injection product candidate in the post-surgical setting."

Incline separately announced today that it has entered into an agreement to complete a $43 million Series A venture financing, which will be used primarily to fund the development of IONSYS. Cadence will receive $500,000 of Incline Series A preferred stock, and Mr. Schroeder has been appointed as Cadence's representative on the Incline board of directors.

Upon closing of the transaction, David Socks, Senior Vice President, Corporate Development and Strategy of Cadence, has resigned from Cadence to join Incline as President and Chief Operating Officer.

Incline Option Agreement Terms

Under the terms of the option agreement, Cadence will pay Incline a $3.5 million upfront option fee and a second $3.5 million fee upon the commencement of the second option period if Cadence has not yet exercised its option to acquire Incline.  The second option period commences on the later to occur of 12 months or the date on which Incline receives the second tranche of its Series A financing and extends until the earlier to occur of 42 months or the date on which Incline submits a supplemental New Drug Application for IONSYS to the FDA, subject to certain limitations.  Cadence may exercise its option to acquire Incline at any time during the first option period for an amount not to exceed $135 million and at any time during the second option period for an amount not to exceed $228 million plus payment of an additional amount not to exceed $57 million upon FDA approval of IONSYS.

Secured Loan Facility

The secured loan facility is available to the Company in two advances, with the first advance of $20 million to be made no later than June 30, 2010, and the second advance of $10 million to be made upon approval by the U.S. Food and Drug Administration of Cadence's investigational product candidate, OFIRMEV™ (acetaminophen) injection on or before December 31, 2010.  This secured loan facility replaces the company's prior facility with the same loan syndicate, established in February 2006, which currently has an outstanding balance of approximately $3.3 million.

"This funding strengthens our balance sheet at an attractive cost of capital while minimizing dilution as we prepare for the potential launch of our investigational product candidate, OFIRMEV™ (acetaminophen) injection," said Ted Schroeder, Cadence's President and Chief Executive Officer.  

Further information with respect to both transactions is contained in a Current Report on Form 8-K which will be filed today with the Securities and Exchange Commission.