CombinatoRx and Neuromed Pharmaceuticals complete merger agreement

CombinatoRx, Incorporated (NASDAQ: CRXX) and Neuromed Pharmaceuticals Inc. announced today that they have merged. This merger brings together the product assets and financial resources of both organizations, including potential Exalgo™ milestone and royalty revenue, CombinatoRx’s portfolio of product candidates and unique drug discovery capabilities.

“The Neuromed team will bring their considerable product development expertise to bear on our product candidate pipeline to enable the potential creation of exciting new therapeutics”

The combined company will trade under the stock symbol “CRXX“ on the NASDAQ Global Market. Dr. Christopher Gallen, formerly President and CEO of Neuromed, will be President and CEO and Robert Forrester, formerly Interim President and CEO of CombinatoRx, will be COO of the combined company. Both Dr. Gallen and Mr. Forrester have joined the board of directors of the combined company. Under the merger agreement, CombinatoRx issued approximately 14.9 million new shares of its common stock to Neuromed stockholders and placed another approximately 67.8 million new shares of its common stock in escrow. Escrow shares will be released in whole or in part to former Neuromed stockholders based upon the outcome and timing of the FDA’s review of the New Drug Application (NDA) of the product candidate Exalgo, which has a February 22, 2010 PDUFA review date.

“CombinatoRx has the potential to create a thriving biopharmaceutical business based on the nearer-term revenue-generating potential of our partnered product assets, such as Exalgo and Prednisporin™, while focusing internal efforts on key programs in our product pipeline with the highest likelihood of creating value going forward,” commented Christopher Gallen, MD, Ph.D., President and CEO of CombinatoRx.

“The Neuromed team will bring their considerable product development expertise to bear on our product candidate pipeline to enable the potential creation of exciting new therapeutics,” said Robert Forrester, Chief Operating Officer of CombinatoRx.

Merger Details

CombinatoRx issued approximately 14.9 million new shares of its common stock to Neuromed stockholders and placed another approximately 67.8 million new shares of its common stock in escrow. Escrow shares will be released in whole or in part to former Neuromed stockholders based upon the outcome and timing of the FDA’s review of the NDA product candidate Exalgo, which has a February 22, 2010 PDUFA review date. Based on the timing of the FDA’s approval decision on Exalgo, the percentage ownership of the combined company will be adjusted by releasing shares out of escrow to former Neuromed stockholders or returning shares from escrow back to CombinatoRx for cancellation.

• If Exalgo approval is received by December 31, 2009, pre-merger CombinatoRx stockholders will own 30% of the combined company.
• If approval is received between January 1, 2010 and September 30, 2010, pre-merger CombinatoRx stockholders will own 40% of the combined company.
• If approval is received between October 1, 2010 and December 31, 2010, pre-merger CombinatoRx stockholders will own 60% of the combined company.
• If approval is not received by December 31, 2010, pre-merger CombinatoRx stockholders will own 70% of the combined company.

About the Combined Company

The combined company has substantial opportunity for building value going forward, including:

• Partnered product assets such as Exalgo and Prednisporin:
  • Exalgo, a significant late-stage product opportunity which was recently acquired by Mallinckrodt Inc., a subsidiary of Covidien plc, as a key asset in their emerging branded pain management franchise. The key terms of the agreement include $15 million in upfront payments, additional development funding of up to $16 million to cover internal and external costs associated with Exalgo, an FDA approval milestone of $30 million, which could potentially increase up to $40 million, and tiered royalties on Exalgo net sales after FDA approval.
  • Prednisporin, a CombinatoRx-derived combination drug candidate, which was recognized as a key ophthalmic asset by Sanofi-Aventis in its acquisition of our collaborator, Fovea Pharmaceuticals. CombinatoRx is eligible to receive development and regulatory-based milestone payments for Prednisporin of up to approximately $40 million and increased tiered royalty payments of up to 12% of net sales.
• Key pipeline programs with the potential to generate long-term value.
• Experienced leadership team with substantial product development expertise and many drug approvals.
• Validated drug discovery technology as illustrated by the CombinatoRx-Novartis oncology collaboration, which has the potential to generate future product opportunities and milestone payments for CombinatoRx.