Ikaria shareholders to sell Commercial Business to Madison Dearborn Partners

Dec 26 2013

Ikaria, Inc., a critical care company focused on developing and commercializing innovative therapies designed to address the significant needs of critically ill patients, announced today that its investor group and employee shareholders have reached a definitive agreement to sell the Commercial Business to Madison Dearborn Partners in a transaction valued at approximately $1.6 billion.

Ikaria's selling investor group comprises New Mountain Capital, Arch Venture Partners, Venrock, and 5AM Ventures, who created the company in 2007 in an approximately $670 million cash and stock merger of INO Therapeutics, a leader in gaseous drugs, and Ikaria, Inc., a biotechnology company. New Mountain Capital was the lead investor, investing $220 million for a convertible preferred security with majority control. The seller of INO Therapeutics, The Linde Group (Deutsche Börse: LIN), retained a 17% equity position in the combined entity and is an additional member of the existing shareholder group. Since the original combination, Ikaria has experienced significant growth and corporate development. Over this period, the Company has substantially improved its service offering to hospitals through device development, emergency support services, and ongoing training as well as recruited a world-class management team and expanded the business internationally.

Ikaria's lead product is INOMAX® (nitric oxide) for inhalation, the only FDA approved drug for the treatment of hypoxic respiratory failure associated with pulmonary hypertension in term and near-term infants. The discovery of nitric oxide properties led to a 1998 Nobel Prize in Medicine and is the basis of INO Therapeutics' original work on inhaled nitric oxide with Dr. Warren Zapol at the Massachusetts General Hospital.

"We would like to greatly thank the management team and the investor group for their hard work and dedication in building Ikaria into a leading provider of critical therapies to hospitals around the world. We look forward to working with Madison Dearborn in the years ahead," said Steve Klinsky, founder and CEO of New Mountain Capital. "We are extremely proud of the value-added approach of the investor group in developing Ikaria as a standalone company, recruiting a talented management team and supporting multiple business building initiatives," said Matt Holt, managing director of New Mountain Capital and Ikaria Board Member. "Together we have built a Company that has exceeded our expectations and provided a critical service to its customers."

The Ikaria shareholders will reinvest a portion of their proceeds into a 45% interest in the new parent Company. In addition, existing shareholders will own an independent research stage company that will be spun out of Ikaria. The research company has three high potential programs in clinical development and approximately $80 million in cash to fund the programs to their human proof of concept milestones. These programs consist of products at the intersection of drugs and devices to address significant unmet needs in cardio-pulmonary medicine, including:

• inhaled nitric oxide via pulsed delivery for pulmonary arterial hypertension (PAH)
• inhaled nitric oxide via pulsed delivery in pulmonary hypertension secondary to chronic obstructive pulmonary disease (COPD)
• bioabsorbable cardiac matrix (BCM) to prevent left ventricular remodeling and congestive heart failure after acute myocardial infarction

"We have been very pleased with the support and assistance of New Mountain and the investor group, who have added meaningful value to the growth of the Company," said Daniel Tassé, Chairman and CEO of Ikaria. "We are looking forward to working with Madison Dearborn as we embark on the next stage of Ikaria's development. I am also confident that the existing Ikaria investors will provide strong support to the newly independent research company in its clinical trials for three groundbreaking research programs."

"We are very excited to capitalize on Ikaria's core expertise at the intersection of drugs and devices to enable new therapies for large unmet needs," said Bryan Roberts of Venrock. "We believe all three of these compelling programs may reach significant value creating milestones over the next 12 to 18 months."

Subject to customary regulatory approvals and closing conditions, the transaction is expected to close in the first quarter of 2014. Credit Suisse acted as lead financial advisor and Morgan Stanley also acted as a financial advisor to Ikaria. Fried, Frank, Harris, Shriver & Jacobson LLP and Wilmer Cutler Pickering Hale and Dorr LLP served as legal advisor to Ikaria.