A merger agreement between Pharmathene Inc., of Annapolis, Md., and Theraclone Sciences Inc., of Seattle, will create a combined company boasting four clinical-stage antibodies in the areas of infectious disease.

In an all-stock transaction, a wholly owned subsidiary of Pharmathene, which has a market capitalization of $81.61 million, will merge into privately owned Theraclone, and Pharmathene will issue shares of its common stock to Theraclone stockholders such that Theraclone will own 50 percent of the combined company. Pharmathene's stock (NYSE:PIP) lost 13 cents to close at $1.64 Thursday.

The new company's pipeline will be led by TCN-032, a monoclonal antibody for pandemic and severe seasonal influenza. Theraclone has completed a Phase IIa study of TCN-032 and plans to announce the results later in 2013.

"Each year, more than 200,000 people in the United States are hospitalized with severe flu infection. Antiviral treatments are available but often are not effective in seriously ill or immunocompromised patients," said Theraclone CEO Clifford J. Stocks during an investor conference Thursday morning.

Stocks said there is a "clear need" for new therapies in influenza, based on new mechanisms of action to address the evolving challenge of the virus. "There is a sizable market opportunity for this product," Stocks said.

A Phase I study of TCN-032 showed that the antibody was well tolerated in healthy volunteers with no dose-limiting toxicities or serious adverse events. It also had a favorable immunogenicity profile.

Theraclone's second major contribution to the pipeline is its antibody for cytomegalovirus infection, TCN-202, which is common among immunocompromised people, including those with HIV, cancer and those undergoing organ transplant surgery.

TCN-202 has completed a Phase I trial, and will begin a Phase II study in solid organ transplant later this year. Theraclone reported that TCN-202 was well tolerated in the Phase I study, with no dose-limiting toxicities or serious adverse events. It also had a favorable immunogenicity profile.

Theraclone also brings to the new venture a lucrative partnership with Pfizer Inc. In 2011, it signed a multiyear R&D collaboration with the pharma giant worth up to $632 million. Under the agreement, the companies are using Theraclone's I-STAR technology to discover broadly protective monoclonal antibodies against up to two infectious disease targets and up to two cancer targets. Pfizer will receive an exclusive worldwide license for any therapeutic antibodies discovered under the collaboration. (See BioWorld Today, Jan. 20, 2011.)

I-STAR technology uses memory B cells from blood samples of human donors with natural resistance to the disease of interest. Each memory B cell has the potential to differentiate and make a unique antibody clone. The company cultures tens of thousands of memory B cells in microtiter wells at a density of one cell per well, then activates those cells to propagate and differentiate into antibody-producing cells.

Antibodies that are secreted into the culture medium are harvested in sufficient quantity to enable screening for biological activity. Once an antibody with desired activity is found in the screen, the gene sequence for that antibody is obtained from the corresponding antibody-producing cells. The antibody genes then can be inserted into immortalized mammalian cells to enable production of unlimited quantities of that antibody clone for further study.

The technology allows Theraclone to test the function of tens of thousands of natural human antibodies rapidly and to find those with exceptional biologic activity.

Theraclone also has an R&D agreement dating to October 2009 with Zenyaku Kogyo Co. Ltd., of Tokyo, to use I-STAR to discovery antibodies for pandemic influenza and severe seasonal influenza. Theraclone received an up-front cash payment and is eligible for R&D milestones of more than $18 million through Phase I, plus additional milestones and royalties on future sales.

Pharmathene's contribution to the new, combined pipeline consists of Sparvax anthrax vaccine and Valortim anthrax antitoxin. Sparvax is a recombinant protective antigen, a next-generation anthrax vaccine for pre- and post-exposure prophylaxis of anthrax.

Analysis of clinical trial immunogenicity data for Sparvax suggested a preliminary estimate of efficacy in humans of more than 90 percent protection and nearly 100 percent protection based on a six-month and 12-month booster dose, respectively. The analysis was based on a correlate of protection established under the animal rule, in accordance with FDA guidelines.

Results from a Phase I study of Valortim showed that a single dose could provide levels of antibodies in humans that correlate to protective levels in animal models. The drug also was well tolerated when administered as a single 0.3 mg/kg to 20 mg/kg intravenous infusion or as a single intramuscular injection at 100 mg. Valortim is a fully human monoclonal antibody in development for both post-exposure prophylaxis and therapeutic treatment for anthrax infection.

Pending litigation related to a failed merger with Siga Technologies Inc. may offer upside for the new Pharmathene/Theraclone combined company. In 2012, the Delaware Chancery Court issued an order upholding its September 2011 ruling that granted Pharmathene a 50 percent share, over 10 years, of Siga's net profits from its smallpox drug ST-246, which was being developed under a government contract that could be worth up to $2.8 billion. (See BioWorld Today, Sept. 23, 2011.)

Siga's appeal of that decision is pending, with a decision due in mid-2014.