DOR BioPharma to buy Denmark’s Gastrotech for $9 million in shares

“This acquisition will deepen our product pipeline and fortify DOR’s focus on cancer/GI disease research through the acquisition of two clinical-stage,” said Michael T. Sember, President and Chief Executive Officer of DOR, in a statement. Gastrotech has a drug for irritable bowel syndrome in Phase II trials with Lilly, and another drug for appetite-regulation in early-stage trials.

At the same time, DOR Pharma said its shares may be delisted by the American Stock Exchange, as the exchange says the company has not met a requirement to maintain more than $6 million of stockholders’ equity. The company said it is appealing, and that it may apply for a listing in Copenhagen.

To pay for Gastrotech, DOR BioPharma said it will issue Gastrotech stockholders $9 million worth of DOR BioPharma common shares, priced at the 10-day volume weighted average immediately prior to the close of the purchase. However, DOR BioPharma said in no event would it issue fewer than 20 million or more than 30 million shares of its stock to Gastrotech’s shareholders – giving an effective price per share of between 30 cents and 45 cents.

In addition, DOR BioPharma said it will pay Gastrotech shareholders another $30 million in cash or stock if the company meets a series of developmental, regulatory and commercial milestones.

The acquisition covers Gastrotech’s ongoing clinical programs, as well as all intellectual property and facilities. The Gastrotech senior management team will remain active at DOR BioPharma. Hans Schambye, Gastrotech chief executive officer, will become the chief operating officer at DOR BioPharma. The deal is pending for approvals from shareholders at both companies.

Once the deal closes, DOR BioPharma said two drug-development programs will enter its pipeline from Gastrotech. They include GTP-010, an analogue of glucagon-like peptide-1. The company said Gastrotech is studying GTP-010 with Eli Lilly in a Phase 2, double-blind, placebo-controlled trial to treat pain associated with irritable bowel syndrome. The other drug is GTP-200, Gastrotech’s wild type ghrelin compound, a naturally occurring peptide hormone produced in the stomach to stimulate appetite. DOR BioPharma said preclinical and clinical studies have demonstrated GTP-200’s positive effect on appetite regulation, food intake and metabolism.

DOR’s lead product, orBec(R) (oral beclomethasone dipropionate), is a potent, locally-acting corticosteroid being developed for the treatment of intestinal Graft-versus-Host disease (iGVHD), a common serious complication of bone marrow transplantation for cancer, as well as other GI disorders characterised by severe inflammation. The company said it has a plan to file a new drug application with the FDA for orBec(R) for the treatment of iGVHD in early 2006.