Adial Pharmaceuticals (NASDAQ:ADIL) said it has acquired Azora Therapeutics in a stock-for-stock transaction and entered into a concurrent private placement financing for up to $64 million, positioning the combined company around Azora’s lead ulcerative colitis program.
Speaking on a conference call announcing the transaction, Adial Chief Executive Officer Cary Claiborne called the deal a “transformative transaction” that repositions the company to pursue what management views as a significant opportunity in ulcerative colitis.
AT177 Becomes Central Development Focus
Matt Davidson, PhD, co-founder and former CEO of Azora, has joined Adial as chief development officer and a member of the company’s board of directors. Davidson said Azora’s work was inspired in part by co-founder Julie Saiki’s personal experience as a patient with ulcerative colitis and by the goal of developing a new therapy for the disease.
Davidson said Azora’s program originated from work involving Indigo naturalis, a botanical extract that demonstrated clinical benefit in ulcerative colitis but also had potential systemic safety liabilities. He said Azora identified indirubin as the most potent AhR agonist within Indigo naturalis and as the molecule responsible for efficacy.
AT177 is an oral, fully synthetic, patented AhR agonist designed to liberate indirubin directly in the colon, Davidson said. He described the approach as intended to capture the benefit of Indigo naturalis in a controlled oral dosage form with limited systemic exposure.
Davidson said the ulcerative colitis market continues to face challenges in achieving durable remission with a safe and effective oral drug. He noted that many approved therapies require intravenous or subcutaneous administration, can carry immunosuppressive burdens and are associated with low remission rates and loss of response over time.
Adial said its near-term development priorities are to advance AT177 through IND-enabling studies into Phase 1 safety and pharmacology studies, followed by a Phase 1b trial in patients with ulcerative colitis. Davidson also said the company believes its AhR agonist platform could have potential across other immune-mediated conditions, including other inflammatory bowel diseases.
Financing Led by Healthcare Investors
Claiborne said Adial entered into a definitive agreement for a private investment in public equity, or PIPE, expected to generate approximately $32 million in gross proceeds before placement agent and other offering expenses. The company may be eligible to receive an additional $32 million tied to a development milestone involving IND opening and first dosing, according to management’s remarks.
The financing was led by Coastlands Capital, with participation from Stonepine Capital Management, Boxer Capital Management, AuGC BioFund, other institutional investors, insiders and management.
After underwriting and private placement fees, Claiborne said Adial expects the total cash, anticipated milestone payment and current cash held by the company to support advancement of AT177 through key preclinical and clinical milestones, including IND-enabling studies and Phase 1a and Phase 1b clinical studies in ulcerative colitis.
Transaction Structure and Ownership
Adial said the acquisition was structured as a stock-for-stock transaction. All outstanding equity interests of Azora were exchanged based on a fixed exchange ratio for a combination of 437,474 shares of Adial common stock and approximately 12,930 shares of Adial Series A non-voting convertible preferred stock, representing 12,930,617 shares on an as-converted basis.
The private placement includes an initial upfront financing of approximately $32 million in gross proceeds in exchange for pre-funded warrants to purchase 11,780,948 shares of Adial common stock at a purchase price of $2.75 for each pre-funded warrant sold at the initial closing. The company also described a potential milestone-dependent tranche of up to an additional $32 million in gross proceeds in exchange for pre-funded warrants to purchase up to 11,780,948 shares of common stock and common warrants to purchase up to 11,780,948 shares of common stock at a combined purchase price of $2.75 for each pre-funded warrant and common warrant sold at the milestone closing.
The private placement is expected to close on June 12, subject to customary closing conditions.
Following stockholder approval and excluding the milestone tranche, Adial said its pre-acquisition equity holders are expected to own approximately 7.7% of the company’s common stock. Azora’s pre-acquisition equity holders are expected to own approximately 51%, while investors in the private placement financing, including the conversion of outstanding notes, are expected to own approximately 41.3%. The figures were presented on a fully diluted, as-converted basis without giving effect to beneficial ownership limitations.
Board and Leadership Updates
In addition to Davidson’s appointment, Adial announced that Wendy Young, PhD, has joined its board of directors. Claiborne said Young brings more than 30 years of drug discovery and biopharma leadership experience, including senior leadership roles at Genentech, where she served as senior vice president of small molecule drug discovery.
Young currently serves as an advisor to Google Ventures and as an independent board director and scientific advisor to multiple life science companies, according to the company.
The acquisition was approved by Adial’s board of directors and by Azora’s board of directors and stockholders. Adial said it expects to use proceeds from the private placement primarily to advance AT177 through key clinical milestones.
About Adial Pharmaceuticals (NASDAQ:ADIL)
Adial Pharmaceuticals, Inc, incorporated in Delaware and founded in 2003, is a clinical-stage specialty pharmaceutical company dedicated to the development of treatments for addiction disorders and central nervous system conditions. The company’s mission centers on creating novel modalities designed to enhance patient adherence and clinical outcomes, particularly in areas of high unmet medical need. Adial leverages sustained-release delivery technologies to address the challenges associated with oral medication regimens in addiction therapy.
The company’s lead product candidate, AD04, is a bioerodible subcutaneous implant engineered to deliver naltrexone continuously over a multi-month period for individuals with alcohol dependence.
