Privately owned Swiss company Evolva is taking over troubled fellow-biotech firm Arpida, the two companies announced on Thursday.
Arpida shares have lost nearly all their value after the failure to gain regulatory approval for the company's lead drug candidate, intravenous antibiotic iclaprim, raised worries about its funding.
Evolva Chief Executive Officer Neil Goldsmith said Evolva would gain access to the public capital market through the deal, and help it finance further growth.
Current shareholders of Arpida and Evolva would get approximately one-third and two-thirds, respectively, of the shares of the new company, the firms said in a joint release.
The final allocation depended on an equity financing Evolva would carry out prior to the deal to raise funds, they said.
Evolva's management team will form the management of the combined entity, which will be listed on the Swiss stock exchange under the name Evolva.
Evolva has a drug to treat renal disease and arterial thrombosis in phase I trials and a compound for systemic and other fungal infections that is scheduled for phase I trials early in 2010.
Furthermore, EV-075, a programme for influenza and Ebola, is in late stage pre-clinical testing and is expected to enter phase I in 2010, it said.
Arpida would take a decision on whether to continue developing iclaprim after a recommendation by European regulators expected in October 2009.
Evolva, which has 75 employees, is backed by a group of venture capital investors, including Novartis Venture, a unit of of Novartis AG, Aravis, Sunstone Capital and Dansk Innovationsinvestering.
The deal is subject to shareholders' approval. Arpida will hold an extraordinary general meeting in November.
Bank Vontobel acts as the financial advisor to Evolva. Homburger and Vischer are the legal advisors to Evolva and Arpida, respectively.
(Reporting by Sven Egenter, editing by Will Waterman)