from the October 2017 issue

Arcturus is developing a new delivery method for RNA-based drugs.

Israeli drug company Alcobra Pharmaceuticals Ltd. (Nasdaq: ADHD) has announced its intention of merging with Arcturus, a private San Diego-based company. The merger is taking place six months after Alcobra's clinical trial of its main product for treating attention disorders failed, leaving Alcobra with no significant product, but with cash in the bank.

Arcturus is an RNA drug development company, meaning that its profile matches the profile of Alcobra's investors, who include Israeli and foreign investors in medical companies.

As part of the agreement, Arcturus's shareholders will own 60% of the merged company, while Alcobra's shareholders will receive 40%. The announcement was published yesterday in the US, and Alcobra's share price soared 17% to a price reflecting a $35 million company value in after-hours trading. Acobra had exactly $35 million in cash when the deal was made. According to Alcobra's announcement, its company value for the merger was $46.7 million.

Alcobra has been looking in recent months for a company to merge into itself. The company gave up on its leading product after the trial failed. It previously reported that it had considered many companies, including Israeli companies Entera Bio and Nutrinia, but eventually selected Arcturus.

Arcturus is developing an innovative delivery method for drugs based on RNA (the cell component that translates the genetic plan into active proteins in the body). A delivery method is considered one of the main challenges in RNA treatment, because most of the current drugs are based on proteins. No one to date has managed to develop drugs that both operate in this manner and reach the right place in the body.

Arcturus has signed many cooperation agreements to develop drugs for leading drug companies, which are financing its R&D. The company hopes to receive milestone payments and royalties from some of these agreements in the coming years. Up until now, Arcturus has been financed mainly from these cooperation agreements, without external financing, except for the money to found the company. Arcturus recently decided on a slight change in its strategy by also developing an independent product until a later stage. It needs money to do this, which is now expected to come from Alcobra's cash, and from the capital market.

Reprinted from the Israel High-Tech & Investment Report October 2017

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