Sorrento Therapeutics, Inc. announced the signing of a merger agreement pursuant to which Sorrento will acquire ACEA Therapeutics, Inc. (“ACEA”). The acquisition will include late clinical stage drug Abivertinib, clinical stage candidate AC0058, preclinical stage candidate AC0939, and ACEA’s extensive proprietary library of small molecules (over 1,000,000 compounds), which potentially have applications for numerous human disease indications, including non-small cell lung cancer (NSCLC), B cell lymphomas, systemic lupus, rheumatoid arthritis, multiple sclerosis and viral infections. These compounds are being actively studied in clinical trials and/or preclinical models to advance the most promising candidates rapidly to clinical stage development. Abivertinib, a novel small molecule tyrosine kinase inhibitor (TKI) that selectively targets both a mutant form of the epidermal growth factor receptor (EGFR) and Bruton’s tyrosine kinase (BTK), was originally identified from ACEA’s compound library. Abivertinib has the potential to improve outcomes in resistant prostate cancer, systemic lupus erythematosus, and various B cell lymphomas in addition to NSCLC, an indication for which a registrational/Phase 3 trial has been completed. It is currently being studied as a Phase 2 treatment for COVID-19-induced respiratory compromise in the US and Brazil. A second clinical candidate, AC0058, is a next generation BTK inhibitor, currently in a Phase 1b trial for Lupus patients in the US, which can potentially be expanded to other autoimmune diseases such as multiple sclerosis.
The acquisition will also include ACEA’s state of the art cGMP facility located in Quzhou, China, on a 23-acre campus with five buildings. This facility has successfully manufactured multiple batches of the active pharmaceutical ingredient (API) and final product in capsules for Abivertinib and AC0058 for clinical studies. The ACEA facility currently has capacity to manufacture up to 5,000 kg/year of APIs and 50,000,000 capsules of final drug product.
The ACEA next generation BTKi and other TKI small molecule drug candidates are highly synergistic with Sorrento’s broad biological product pipelines in therapeutic antibodies, antibody drug conjugates (ADCs), autologous chimeric antigen receptor-T (CAR-T) and allogeneic dimeric antigen receptor-T (DAR-T) cell therapies, oncolytic viruses and IL-2 immune modulators. The synergy will potentially enable Sorrento to develop many life-saving, combinational drugs for difficult-to-treat human illness in oncology, autoimmune and infectious diseases.
Dr. Henry Ji, Chairman and CEO of Sorrento Therapeutics, stated, “The ACEA acquisition will bring us a step closer to developing into a major biopharmaceutical company and we look forward to welcoming the ACEA team into the Sorrento family.”
As previously announced on October 16, 2020, Sorrento and ACEA entered into a letter of intent setting forth the terms and conditions by which Sorrento would acquire ACEA. In consideration for the acquisition, at the closing of the merger, ACEA’s equity holders will receive up to an aggregate of $38 million in shares of Sorrento common stock, subject to certain adjustments, based on a price per share calculated in accordance with the merger agreement. In addition to the foregoing consideration, and subject to the achievement of certain clinical and sales milestones (as described below), Sorrento will also pay the ACEA equity holders (i) up to $450,000,000 in additional payments, subject to the receipt of certain regulatory approvals and achievement of certain net sales targets with respect to the assets acquired in the merger and (ii) with respect to specified royalty-bearing products, five to ten percent of the annual net sales thereof, in each case in accordance with the terms of an earn-out agreement. The amount referenced in clause (i) of the preceding sentence includes the amounts that would have otherwise been due to ACEA under that certain License Agreement, dated July 13, 2020, which agreement will terminate in its entirety at the effective time of the merger.
The merger is expected to close in the second quarter of 2021, subject to customary closing conditions and regulatory approval. If the proposed merger is consummated, the issuance of the shares of Sorrento common stock would be made in accordance with an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof and Regulation D and Regulation S thereunder. Such shares of Sorrento common stock would not be registered under the Securities Act and could not be offered or sold without registration unless an exemption from such registration is available. This press release does not constitute an offer to sell or the solicitation of an offer to buy, any shares of Sorrento common stock.