Avanir patent prompts deal talk; Merix shares fall on merger; Canadian Hydro bid appears set

By Cristal Cody

Tupelo, Miss., Oct. 7 - Avanir Pharmaceuticals, Inc. shares jumped 13.62% on Wednesday after the company learned it will receive a new patent for a potential neurological disorder drug called Zenvia.

The patent may push the company to seek a partner with bigger pockets in order to develop the drug commercially, an analyst told Prospect News.

In other situations, shares of Merix Corp. plunged more than 30% on Wednesday following Tuesday's announcement that the company plans to merge in a stock deal with Viasystems Group, Inc.

In other situations, a market source said Wednesday that TransAlta Corp.'s revised C$1.6 billion offer for Canadian Hydro Developers, Inc. likely will clear and close by the end of October.

Meanwhile, stocks were mixed on Wednesday.

The Dow Jones Industrial Average closed down 5.67 points, or 0.06%, at 9,725.58.

The Standard & Poor's 500 index rose 2.86 points, or 0.27%, to 1,057.58, and the Nasdaq Composite index added 6.76 points, or 0.32%, to close at 2,110.33.

Avanir earns drug patent

Avanir said in a statement on Wednesday that it received a "notice of allowance" from the U.S. Patent and Trademark Office that it will be granted a new patent for Zenvia, which also is being developed to treat neuropathic pain.

The patent would extend the company's commercial exclusivity on the drug through at least 2025.

The U.S. Food and Drug Administration has not yet approved the drug.

Carol Werther, an analyst with Summer Street Research Partners, said in an interview Wednesday that the patent news is a great positive for the company.

"I didn't expect it to happen until next year," she said. "They're in the position to respond to the FDA's approval letter early next year and hopefully the product would be on the market by the end of the year. I think they will go through a more expedited track because it's been delayed four years."

The Aliso Viejo, Calif.-based biopharmaceutical company focuses on developing treatments for central nervous systems disorders but also holds other products, including the cold sore treatment brand Abreva.

"When the company had to go into survival mode after 2006 and they had management changes, they had to sell off a lot of their assets," Werther said. "Their main asset is this drug, Zenvia. But they don't have a tremendous amount of money to do large neuropathic pain trials, so I would expect them to look for a partner. It's possible given how small the company is, someone might want to purchase them."

Shares closed up 29 cents, or 13.62%, at $2.42 on Wednesday. The stock has traded from 23 cents to $4.09 over the past year.

Merix falls on Viasystems deal

Shares of Merix dropped 84 cents, or 30.43%, to close at $1.92 after trading as low as $1.80 on Wednesday, a day after the company said it will merge with Viasystems to create the largest publicly traded printed circuit board manufacturer in the United States.

Viasystems spokesman Nicole Schoenberg told Prospect News on Wednesday that the company had no comment on the "market activity."

Merix representatives could not be reached for comment.

The deal will combine rivals Beaverton, Ore.-based Merix and St. Louis-based Viasystems and turn Viasystems into a publicly traded company.

Under the deal's terms, each Merix share will be converted into 0.11 of a newly issued share of Viasystems.

On a conference call with analysts and investors on Wednesday, executives declined to place a value on the deal.

The merger must be approved by Merix shareholders.

Merix chief executive officer Michael Burger said on the conference call that a special shareholders meeting is tentatively scheduled for December.

"It's an excellent strategic fit," he said.

In fact, it was Merix that approached Viasystems to do a transaction, Viasystems CEO David Sindelar said on the conference call.

"It was brought to our attention by their investment banker," Sindelar said. "It was a process that [we helped] run, and a fairly lengthy process, but one they were driving."

The combined company will have access to about $100 million in credit lines and a cash balance of $40 million.

Viasystems employs 10,000 in North America and China, while Merix has 3,000 employees in North America and China.

Canadian Hydro offer likely to pass

Green energy producer Canadian Hydro ended a takeover battle and on Monday accepted energy utility TransAlta's revised bid of C$5.25 a share, up from the earlier offer of C$4.55 a share.

"The downside is limited, in our view, as Canadian Hydro had several alternative offers," a market source said Wednesday. "Shareholder acceptance is likely, with the offer pitched at a 50% premium to Canadian Hydro's pre-bid share price. A higher offer is unlikely."

All regulatory clearances have been received, according to the companies.

Calgary, Alta.-based Canadian Hydro operates 21 renewable energy generation facilities using water, wind and biomass technologies in Canada.

Canadian Hydro shares rose 0.19% to C$5.23 on Wednesday.

U.S.-listed shares of Calgary, Alta.-based TransAlta closed up 5 cents, or 0.25%, at $20.32.

Mentioned in this article:

Avanir Pharmaceuticals, Inc. Nasdaq: AVNR

Canadian Hydro Developers, Inc. Toronto: KHD

Merix Corp. Nasdaq: MERX

TransAlta Corp. NYSE: TAC

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