PharmAthene Inc. is gaining a public listing and up to $70 million in cash through a planned merger with Healthcare Acquisition Corp., a deal coming months after another proposed merged by PharmAthene fell through.

HAQ is a special-purpose acquisition company that went public in 2005 for a deal such as this. PharmAthene, of Annapolis, Md., considered a number of options to move its biodefense business forward before selecting the reverse merger with HAQ.

"This [deal] gets up public probably quicker than we could by any other method, and it gives us a significant amount of cash to fulfill our strategy, which is building the premier biodefense company," David Wright, president and CEO of PharmAthene, told BioWorld Today.

PharmAthene would get about 12.5 million HAQ shares in the deal, at least 52 percent of the merged company. Those shares were valued at about $93.3 million based on the stock's Friday close, with the market cap of the merged firm projected at about $180 million. The shares (AMEX:HAQ) fell 6 cents Monday to close at $7.40. HAQ has about $70 million in cash, nearly what it raised in its initial public offering in July 2005. The merged company would adopt the PharmAthene business, management and headquarters in Annapolis, Md.

Wright said his company, with about six months of cash on hand, considered various merger, financing and other business possibilities to best advance its business before deciding on the merger with HAQ. "We're very pleased with this transaction. We believe it provides the resources we need to execute our business plan. Biodefense is a key issue today, and tomorrow it could be more important. This is not going to go away."

PharmAthene is a development, not discovery, company, and will look to expand its pipeline, as well as expand the applications of existing products, with the additional resources, Wright said. The company is developing counterterrorism products through government grants and other funding, with the idea to adapt the products later for wider commercial uses, both for the government and the private sector.

Its lead products are Protexia, a form of recombinant human butyrylcholinesterase - an organophosphorus scavenger protein produced in the milk of transgenic goats - for use as a prophylactic against acute organophosphorus nerve agent toxicity; and Valortim (MDX-1303), a fully human antibody that targets the Bacillus anthracis protective antigen, for preventing and treating anthrax infection.

The Protexia program was the subject of a contract in September valued at up to $213 million from the Department of Defense U.S. Army Space and Missile Command. Of that total, $34.7 million has been allocated to cover costs into Phase I trials. Wright estimated an investigational new drug application filing in late 2008 on that product.

Valortim, which is partnered with Medarex Inc., of Princeton, N.J., demonstrated safety and tolerability in a Phase I trial. Additional Phase I work is planned, Wright said.

Both Valortim and Protexia have been awarded federal funding, separate from the potential $213 million contract, in the form of DOD appropriations and National Institutes of Health countermeasures grants.

And it was federal funding to New York-based SIGA Technologies Inc. that may have doomed the proposed merger between PharmAthene and SIGA, which SIGA opted out of in early October following the award of a significant grant from the National Institute of Allergy and Infectious Diseases for work on its smallpox drug candidate SIGA-246. PharmAthene would have owned about 68 percent of the merged company under the agreement initially disclosed in June.

HAQ was formed by biotechnology investing veterans John Pappajohn and Derace Schaffer. It sold 9.4 million units in its IPO, each consisting of one share and one warrant. The 9.4 million warrants remain exercisable at $6 per share until July 2010, but only when the stock trades at $10 per share.

The deal remains subject to standard closing conditions, as well as the provision that not more than 20 percent of HAG shareholders vote against the deal and elect to convert their stock into cash. PharmAthene shareholders would be subject to lockup provisions that prevent the sale of half their shares for six months, and the remainder for 12 months. PharmAthene shareholders also would be entitled to up to $10 million in cash payments if it enters a contract with the U.S. government by the end of 2007, covering the sale of Valortim with more than $150 million in expected revenue.