Bangalore-based Strand Life Sciences Pvt Ltd, which focuses on clinical genomics and research in biotechnology, is going through a reverse merger with a little-known NASDAQ-listed firm in the second such transaction by an Indian company to go public overseas.
In the process, it will become only the second Indian healthcare and life sciences firm to be listed in the US after drugmaker Dr Reddy's Laboratories Ltd. Other NASDAQ-listed Indian companies include Rediff, Sify, MakeMyTrip and Videocon d2h Ltd.
In fact, Videocon d2h went public through a similar route last year. It had previously proposed an IPO in India but later withdrew the issue. It then merged with an American ‘blank cheque’ firm started by former MGM chief Silver Eagle Acquisition Corp.
As part of the latest deal, shareholders of Strand will acquire a 68 per cent stake in US-based Venaxis Inc for an undisclosed amount. The current shareholders of Venaxis will own about 32 per cent in the merged company, the NASDAQ-listed firm said in a statement.
The deal is structured in two stages due to Indian tax and financial regulations. In the first leg, Venaxis will buy all shares of Strand Life Sciences and the US company will change its own name to Strand Life Sciences. Accordingly, it will also change its NASDAQ trading symbol. A Venaxis subsidiary will acquire all assets and liabilities of Strand's US subsidiary, Strand Genomics Inc as part of the first closing.
This will be followed by an immediate re-investment of those sale proceeds by Strand Life Sciences' shareholders into Venaxis common stock. The second closing will happen about six months later. At each closing, Venaxis will enter into resale registration rights agreements with the Strand Life Sciences shareholders participating in such closing.
The boards of both the companies have approved the transaction. However, this transaction is subject to shareholder approval of Venaxis, which was founded in 2000 and was formerly known as AspenBio Pharma.
Venaxis, which trades as a penny stock and has a market cap of under $9 million, says it is an in vitro diagnostic company focused on the clinical development and commercialization of its APPY1 blood-based test for appendicitis.
Venaxis had sales of $92,894 and net loss of $5.8 million for January-September period of 2015
The company claims this test was being developed to help identify patients at low probability for acute appendicitis, allowing for more conservative patient management. While the company is evaluating the process of clearance from the US Food and Drug Administration, a limited commercial launch for the APPY1 test is being advanced in select European countries.
For the nine months ended September 30, 2015, Venaxis had sales of just $92,894 with net loss of $5.8 million.
After all the approvals are in place, Vijay Chandru, the co-founder and executive chairman of Strand Life Sciences, will become executive chairman of the combined company while Steve Lundy, president and CEO of Venaxis, will become the CEO. Jeff McGonegal of Venaxis will continue as CFO. The initial combined board will consist of seven members, four from Strand Life Sciences and three from Venaxis.
“The transaction seeks to align Strand Life Sciences’ proven technological expertise in genomic profiling, bioinformatics and data curation with Venaxis’ financial resources, NASDAQ public listing and key management,” the statement said.
Raymond James & Associates and Oppenheimer are joint financial advisors to Strand, and Baker & Hostetler is legal counsel for Strand. Ballard Spahr is legal counsel to Venaxis. In a separate statement, Indian law firm Majmudar & Partners said it also advised Venaxis for this deal.
Strand Life Sciences, which was founded in 2000 by Indian Institute of Science professors, had attracted a slew of investors in the past. Biomark Capital (which split from Burrill & Co) spent $10 million to buy a stake in the company in its Series B round of funding in 2013.
This deal had a mix of primary and secondary components in which its previous investors – ITVUS Fund, WestBridge and angel investors -- exited. The previous investors had invested $3.5 million in 2002.
The company has 2,000 scientific laboratories with about 100 hospitals across the world as its clients. The privately held genomic profiling company uses next-generation sequencing technology for detecting cancer care treatment.