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Peplin: sold for $350 million

Nick Evans
Thursday, 3 September 2009

PEPLIN has become the latest late-stage Australian biotech to be bought out, announcing early this morning it has entered a definitive merger agreement with privately owned Danish pharmaceutical company LEO Pharma.



The company said LEO will pay $US287.5 million (around $A348.5 million) in cash to acquire all of the common stock of Peplin.

The offer values Peplin’s US-based common stock at $US16.99 and its Australian Securities Exchange-traded CHESS depositary interests at $1.03, at current exchange rates, according to the company.

That represents nearly a 75% premium to the company’s current 30-day volume weighted average share price (based on closing prices) of just under 60c.

To date Peplin has spent $US115.9 million in developing its PEP005 actinic keratosis treatment and the rest of its pipeline.

LEO will also provide Peplin with up to $US24 million in loans to fund the company’s operations until the transaction closes, somewhere around the end of the year.

Peplin’s last financial statement to the ASX showed the company had only $US17.75 million left at bank, with an annual cash burn of around $US43 million.

Peplin said its board will unanimously back the proposal, which also has the support of major shareholders MPM Capital and GBS Venture Partners.

According to the company’s US regulatory filing, just over 30% of the company’s stock has already been committed to voting in favour of the merger.

MPM and GBS will both do very well from their recent investment in Peplin if the sale closes, both having last pumped money into the company in August 2008, paying the equivalent of 35c per CDI in a $US24 million raising.

The transaction closes a year of speculation about the company’s future, after it withdrew a $US75 million initial public offering in the US last year.

Long-term chief executive Michael Aldridge quit the company shortly after the close of that capital round, replaced by merger and acquisition specialist Tom Wiggans.

While Peplin has consistently said its strategy to take its PEP005 to market had remained unchanged, sector analysts have long expected the company to be bought out.

Dr Darren Grubb from Intersuisse said the deal appeared to be an excellent one both for Peplin and the broader Australian life science sector.

“It’s a very nice deal. It has a good strategic fit, and the price they’re paying is very attractive,” he said.

“This is the third significant acquisition play in the Australian sector this year, after Arana and Heartware.

“So we see this as a bellwether for what the rest of the world thinks about the life science sector.”

GBS Ventures partner (and Peplin director) Dr Joshua Funder agreed that the deal is a positive step for the Australian life science sector.

“The Peplin-LEO transaction is a great validation of the quality of Australian biotech,” he said.

“The Peplin transaction illustrates that the Australian life science sector is coming of age. The world has long been aware of the excellent quality of Australian life science research and Australian doctors doing clinical trials.

"There are now more companies based on Australian technologies with products in late stage clinical development than ever before. Now Australian biotech companies and products are getting global recognition," he said.

The transaction is subject to approval of Peplin’s stockholders and other customary closing conditions.

Peplin chairman and chief executive Tom Wiggans described LEO as a “globally recognised dermatology leader” and said the company was delighted to have landed the merger deal.

“We are very proud of the accomplishments of the entire Peplin team over the past several years to advance our lead candidate PEP005 Gel for actinic keratosis through to near completion of Phase 3 clinical trials,” he said.

“We are pleased LEO recognises the potential of PEP005 Gel as an innovative product for the treatment of actinic keratoses and other skin diseases.”