Within hours of Wednesday's announcement that OPKO Health Inc. and Israeli firm Prolor Biotech Inc. are seeking to merge in an all-stock transaction valued at about $480 million, several law firms said they were launching investigations into the deal on behalf of shareholders.

The transaction, designed to combine the firms' complementary drug development technologies and add to OPKO's pipeline Prolor's late-stage long-acting human growth hormone product, hGH-CTP, calls for holders of Prolor stock to receive 0.9951 shares of OPKO common stock for each Prolor share. The deal, which has been approved by both boards, values Nes-Ziona, Israel-based Prolor at about $7 per share, a 20 percent premium to Tuesday's closing price.

Prolor could not be reached for additional comment, but Shai Novik, president, said the transaction "recognizes the value we have created at Prolor and provides our shareholders with attractive economic terms, as well as the opportunity to continue to share in the success of the combined company."

Shares or Prolor (NYSE AMEX:PBTH) gained 49 cents, or 8.4 percent, on the news, closing Wednesday at $6.32.

Still, that didn't keep law firm Wohl & Fruchter from launching an investigation into the proposed deal, citing a conflict of interest for OPKO's top executive, Chairman and CEO Phillip Frost, who also is the chairman of Prolor and is largest shareholder, with about a 20 percent stake.

Wohl & Fruchter's investigation will look at, "among other things, whether approval of the merger was improperly motivated by conflicts of interest in light of Dr. Frost's substantial Prolor holdings and position." It and other law firms also took issue with the value of Prolor, after at least one institutional shareholder commented publicly that Prolor likely is worth more than $10 per share.

Shareholder suits such as these are not unusual in biotech M&A deals, though whether they will have any impact on the OPKO/Prolor merger remains to be seen. Completion of the transaction is subject to approval of shareholders of both companies.

If approved, the transaction is expected to close in the second half of this year.

Prolor would bring to the table its technology platform, Carboxyl Terminal Peptide (CTP), which is designed to be attached to existing therapeutic proteins to stabilize therapy in the bloodstream and extend the life span. Lead product hGH-CTP has completed four clinical studies, including a Phase II trial in adults with growth hormone deficiency. Results indicated that the product could reduce the dosing frequency from once-daily to once-weekly injections, and Prolor said a Phase III study is slated to begin later this quarter. It has orphan status in both the U.S. and Europe for both adults and children.

A Phase II study in pediatric patients is ongoing.

Beyond hGH-CTP, Prolor has preclinical programs in hemophilia, obesity and diabetes. The firm had about $35.9 million in total assets at the end of 2012.

For its part, the Prolor deal is only the latest transaction for OPKO, which is building its pipeline and expanding its reach to ex-U.S. markets. The firm is having a busy 2013 so far, having completed the acquisition of Canadian biotech Cytochroma Ltd., picking up a vitamin D prohormone product and a non-absorbed phosphate binder. (See BioWorld Today, March 6, 2013.)

It also gained a foothold in Brazil via its buyout of Silcon Comercio, Importancao E Exportacao de Produtos Farmaceuticos e Cosmeticos Ltda. and reached into Russia by acquiring a 10 percent stake in OAO Pharmsynthez, a Moscow Stock Exchange-listed firm.

OPKO's shares (NASDAQ:OPKO) fell 10 cents Wednesday to close at $6.96.