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[Updated 9/19/17, 10:39 am. See below.] A bidding war has erupted for gene therapy developer Dimension Therapeutics.
Ultragenyx Pharmaceutical (NASDAQ: [[ticker:RARE]]) announced Monday that it is ready to pay $5.50 per share in cash, or approximately $136 million, to acquire Cambridge, MA-based Dimension (NASDAQ: [[ticker:DMTX]]). The non-binding proposal from Novato, CA-based Ultragenyx is a 358 percent premium over Dimension’s stock price on Aug. 24, the last trading day before RegenxBio said it reached an agreement to pay $3.41 for each Dimension share in a stock deal valued at approximately $86 million.
Besides offering Dimension shareholders an immediate cash return, Ultragenyx says that it can also close the transaction more quickly than RegenxBio (NASDAQ: [[ticker:RGNX]]). The board of Ultragenyx has already approved the deal, which the company says it plans to finance using cash on hand. Ultragenyx says it could complete the deal within 25 days of signing a merger agreement.
On Tuesday, Dimension said in a press release that the Ultragenyx proposal could lead to a “superior proposal” as outlined in its acquisition agreement with RegenxBio. Those terms allow Dimension to begin confidential discussions with Ultragenyx. Dimension said it would have no further comment until its board of directors has completed discussions with Ultragenyx. [Paragraph added with Dimension response.]
Ultragenyx could be looking for ways to bolster its drug pipeline following the Phase 3 clinical trial failure last month of an experimental treatment for GNE myopathy, a rare disease that leads to progressive muscle atrophy and weakness. Ultragenyx CEO Emil Kakkis is familiar with Dimension because he is a member of the Cambridge company’s scientific advisory board. In a letter to Dimension CEO Annalisa Jenkins, Kakkis wrote that Ultragenyx plans to use its clinical and regulatory expertise to continue development of Dimension’s gene therapies. He also said that Ultragenyx believes that its drug candidates offer no competitive overlap with Dimension’s experimental therapies, which would ease any antitrust concerns from regulators. If the deal is approved, Ultragenyx plans to keep the company’s Cambridge site, including manufacturing, open.
Dimension’s gene therapy development efforts have stumbled this year. In January, the company reported early clinical trial data suggesting that its experimental hemophilia B therapy could prompt an immune system response, potentially weakening the gene therapy’s effect. Dimension’s stock price tumbled on that news, and in June, the company announced layoffs for one quarter of its staff as it redirected its efforts to the rest of its drug pipeline.
A RegenxBio acquisition would bring Dimension’s assets to the Rockville, MD-based company, which spun out Dimension four years ago. Dimension’s gene therapies are based on gene delivery technology licensed from RegenxBio. According to the acquisition agreement that RegenxBio and Dimension hammered out, Dimension is barred from seeking a better offer. Dimension also faces unspecified “certain restrictions” on responding to competing offers, according to regulatory filings. Calling off the deal would trigger a $2.85 million termination fee.
In a research note, Leerink Partners analyst Joseph Schwartz says that Dimension’s therapeutic candidates would bolster Ultragenyx’s drug pipeline. Schwartz adds that Ultragenyx may be interested in Dimension’s manufacturing capability, an aspect of drug development that the company has historically outsourced. But an improved RegenxBio offer, if the company opts to make one, would complicate those Ultragenyx plans, Schwartz says.
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