BioWorld International Correspondent

Evotec AG is catching a falling star, in the shape of Neuro3d SA, which it is acquiring in an all-stock deal valued at about €22 million (US$29.4 million). In exchange, it is receiving €18 million cash, an additional €4 million due in tax credits and other payments, plus an early stage research program involving an undisclosed CNS target. It is funding the transaction by issuing 6 million shares, priced at €3.70 each.

In essence, the deal comprises a fund-raising round without the associated transaction costs, with an early stage program thrown in for free.

"We didn't seek this. It's good to have, so it's a fantastic opportunity for us," Joern Aldag, CEO of Hamburg, Germany-based Evotec told BioWorld International. Raising a similar amount of cash, via a private placement, for example, would have imposed a direct transaction cost of 3 to 4 percent, he said, and the company also would have had to offer a discount of 5 percent to 10 percent on its share price.

The value of the deal is linked to the cash that Mulhouse, France-based Neuro3d is bringing to the table. Evotec will reduce the number of shares it is issuing should the additional €4 million not materialize.

Neuro3d, once one of French biotechnology's brightest hopes, has been in the process of winding down its operations, having decided not to seek additional investment for its lead drug candidate, ocaperidone, which had been in development for schizophrenia. Although ocaperidone yielded positive Phase II data, New Brunswick, N.J.-based Johnson & Johnson subsidiary Janssen Pharmaceutical decided not to exercise an option it had on the compound, and Neuro3d failed to pick up an alternative partner. "I think it didn't differentiate enough to be able to partner it," Aldag said.

Neuro3d had raised €55.2 million since its formation in 2000, and had attracted several blue-chip venture capital investors, including Soffinova Partners, Apax Partners, both of Paris; Healthcap, of Stockholm, Sweden; and Techno Venture Management, of Munich, Germany. It raised €31.5 million in its third round over two years ago, which attracted several new investors, including Gilde Investment Management, of Utrecht, the Netherlands, and AXA Private Equity, of Paris, which co-led the round, and Healthcare Private Equity LP, a fund managed by Scottish Widows Investment Partnership, the asset management arm of Lloyds TSB Group plc, of London; and GIMV, of Antwerp, Belgium. (See BioWorld International, Jan. 5, 2005.)

For Evotec, the cash injection will strengthen its balance sheet in advance of potential partnering discussions for its pipeline of CNS drug candidates. The company didn't need any cash, Aldag said. It held €78.8 million in cash and equivalents on Dec. 31, 2006. The program it is gaining from Neuro3d - which includes proprietary assays and knowledge of the target, along with a compound library - will not require substantial investment at this point. "The program is very early stage," Aldag said. "It could be interesting. It may not."

Evotec also reported its financial results for 2006. Group revenues increased by 6 percent to €84.7 million, while its net loss dipped slightly from €33.6 million in 2005 to €32.5 million. Revenues from continuing operations were €67.4 million. The company exited its tools and technologies business during the year, selling assets to Wellesley, Mass.-based PerkinElmer, Inc. and to Tokyo-based Olympus Corp. The company is forecasting revenues of €65 million to €70 million in 2007.

Evotec's share price dropped 5 cents to close at €3.55 on the Xetra exchange in Frankfurt following release of the news.