Less than a week after completing the divestiture of several noncore assets, Evotec AG agreed to acquire Renovis Inc. in a $151.8 million stock deal.

The merger would combine Hamburg, Germany-based Evotec's pipeline of predominantly clinical-stage central nervous system drugs with South San Francisco-based Renovis' preclinical portfolio of products for CNS and related disorders. The combination creates a "risk profile that doesn't kill the company if one of the compounds doesn't progress," Evotec President and CEO Jörn Aldag said during a conference call.

Investors in Renovis liked the deal, which implies a purchase price of $4.75 per share, a significant premium to the company's Tuesday closing price of $3.32. Shares of Renovis (NASDAQ:RNVS) rose 68 cents, or 20.5 percent, to close at $4 Wednesday, while shares of Evotec (Frankfurt Stock Exchange: EVT) fell €0.10, or 3 percent, to close at €3.06.

The transaction would involve the exchange of 34.57 million Evotec shares for 32.79 million Renovis shares. Evotec would issue American depository shares representing 1.0542 Evotec shares in exchange for each outstanding share of Renovis common stock. The deal has been unanimously approved by the boards of both companies and is expected to close in the first quarter of 2008, pending approval of Renovis stockholders, the approval of Evotec's application to list on the Nasdaq Global Market and customary closing conditions.

As of Tuesday, the combined company was expected to have a market capitalization of €342.1 million (US$474.5 million), of which original Evotec shareholders would own about 68.8 percent and Renovis shareholders 31.2 percent. Aldag would serve as president and CEO of the new company, which will be called Evotec, while former Renovis President and CEO Corey Goodman would serve on the supervisory board. Evotec will maintain its current locations as well as Renovis' South San Francisco facilities.

While the research and development budget for the merged Evotec currently is under review, Aldag noted that the company would have no shortage of funds with which to advance its pipeline. As of the end of August, Renovis had $87 million in cash and equivalents, while Evotec had $97 million. The combined company would have a pro forma cash position of about $175 million, not including $64 million in cash proceeds to be paid upon the completion of Evotec's divestiture of its chemicals business to Aptuit Inc.

The Aptuit deal was announced last week, but Evotec previously had transferred its library synthesis business into a joint venture with India-based Research Support International Ltd. and sold its screening instrument and software subsidiary, Evotec Technologies GmbH, to PerkinElmer Inc. for $30.6 million. The divestitures were part of a plan to "transition Evotec into a focused and pure-play drug discovery and development company," Aldag said. (See BioWorld Today, Sept. 12, 2007.)

Moving forward, Evotec intends to focus on its pipeline, led by insomnia drug EVT 201. The partial positive allosteric modulator of GABA-A receptors met its endpoints in a 67-patient Phase II trial, and data from a Phase II trial in elderly insomniacs are expected next month. Aldag said the company is "currently in the process" of partnering the drug and expects to solidify a deal in 2008.

Evotec's other clinical programs include EVT 101, a selective NR2B subunit-containing NMDA receptor antagonist in a Phase Ib trial for cognition, and EVT 302, a selective and reversible MAO-B inhibitor in a Phase I trial for smoking cessation. A Phase IIa study of EVT 101 in pain is slated for the second half of 2007, while a Phase II trial of EVT 302 for smoking is expected to begin next year.

Although Evotec had a few of its own programs in preclinical development, the bulk of its preclinical focus will now shift to Renovis' programs. Chief among them are a family of VR1 antagonists with potential applicability in pain, urinary incontinence and asthma. The compounds, which are expected to move into the clinic next year, are partnered with Pfizer Inc. in a deal that could bring in up to $170 million in milestone payments, as well as royalties. (See BioWorld Today, June 1, 2005.)

Renovis also is developing P2X7 antagonists for the potential treatment of rheumatoid arthritis, irritable bowel syndrome and chronic obstructive pulmonary disease, and P2X3 antagonists for the potential treatment of pain and urinary disorders. The former program is expected to enter the clinic next year and the latter in 2009. Renovis had been focused on its preclinical programs since its stroke drug NXY-059 failed a Phase III trial last fall, resulting in a 70 percent drop in the company's value and the loss of a partnership with AstraZeneca plc. (See BioWorld Today, Oct. 27, 2006.)

But even before the trial failed, Renovis had "already identified Evotec as a perfect partner for us to merge with," Goodman said during the conference call, citing synergies in the CNS space, drug discovery capabilities, solid partnerships and strong funding within both companies.