San Diego Business Journal

Meritage Pharma Buyout Deal Could Top $90M

By Kelly Quigley Tuesday, December 27, 2011

A Pennsylvania biopharmaceutical company said Dec. 22 that it would pay millions — possibly more than $90 million — to acquire Carmel Valley-based Meritage Pharma Inc., which is developing a drug to treat a rare disease that causes an allergic inflammation of the esophagus.

ViroPharma Inc., a publicly held company based in Exton, Pa., said it paid Meritage an initial $7.5 million and will pay up to $12.5 million more for the exclusive right to purchase the company at a price of $69.9 million after its drug meets various clinical and regulatory goals.

The deal also calls for “potential additional payments” that will hinge on U.S. Food and Drug Administration approval and other milestones.

Meritage, founded in March 2008, has raised $30.5 million in Series A financing from investors that include Domain Associates, Latterell Venture Partners and The Vertical Group, according to its website. A Meritage spokesman declined to provide any more company details, including number of employees.

Meritage has ushered its drug candidate — called oral budesonide suspension or OBS — through Phase 2 clinical studies and is now looking ahead to Phase 3. OBS treats a chronic condition called eosinophilic esophagitis that affects approximately 160,000 patients, mostly children, in the United States.

“This disease profoundly affects the lives of these patients, causing stomach and chest pain and affecting their ability to swallow and eat normally,” said Vincent Milano, ViroPharma president and CEO. “Over time, this disease can lead to malnutrition, significant weight loss and potentially esophageal damage.”

In recent clinical studies involving 82 pediatric patients, those treated with OBS “showed a statistically significant response” compared with the placebo group, Meritage said.

The Food and Drug Administration in June granted OBS an orphan drug designation. The orphan drug program, designed to advance drugs for rare diseases, gives the drugmaker seven years of market exclusivity.

Meritage President and CEO Elaine Phillips said the company’s goal “is to ensure that this therapy is available for (eosinophilic esophagitis) patients and their caregivers as soon as possible.”