On April 27, 2023 Starton Therapeutics, Inc. ("Starton" or "the Company"), a clinical-stage biotechnology company focused on transforming standard-of-care therapies with proprietary continuous delivery technology, and Healthwell Acquisition Corp. I (Nasdaq: HWEL) ("Healthwell"), a special purpose acquisition company, reported that they have entered into a definitive business combination agreement (the "Business Combination Agreement") pursuant to which, among other things, HWEL Holdings Corp., a newly formed wholly-owned subsidiary of Healthwell ("Pubco"), has agreed to acquire Starton and become a publicly traded company (the "Transaction") (Press release, Starton Therapeutics, APR 27, 2023, View Source [SID1234630646]). Upon the closing of the Transaction, which is expected to occur during the second half of 2023, Pubco will be renamed Starton Holdings Corp., and each share of common stock and warrant of Healthwell will be exchanged, on a one-for-one basis, for shares of common stock and warrants of Pubco. After the consummation of the Transaction, the common stock and warrants of Pubco are expected to be listed on the Nasdaq and Starton and Healthwell will each become wholly-owned subsidiaries of Pubco.
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Starton is transforming standard-of-care therapies with proprietary continuous delivery technology that can increase the efficacy of approved drugs, make them more tolerable and expand their potential use. The Company’s technology has two programs in the clinic and three pre-clinical programs. STAR-LLD, its lead program, targets multiple myeloma ("MM") and chronic lymphocytic leukemia ("CLL"), and other hematologic cancers whose treatments expand and improve on the current uses of lenalidomide in both efficacy and tolerability. Lenalidomide can reduce the quality of life for patients, leading to dose reductions and discontinuation. Starton’s technology aims to provide continuous delivery treatment so cancer patients can live better, longer.
Starton’s established leadership team, led by Chairman, Chief Executive Officer and Co-Founder Pedro Lichtinger, is supported by renowned scientific committee members, including Mohamad Hussein, MD, who practiced at the Cleveland Clinic Foundation for two decades and is former VP, Global Multiple Myeloma Franchise at Celgene and current Professor of Medicine and Oncology at the University of South Florida; Kenneth Anderson, MD, Kraft Family Professor of Medicine at Harvard Medical School and Director of the LeBow Institute for Myeloma Therapeutics and Jerome Lipper Multiple Myeloma Center at Dana-Farber Cancer Institute; and Asher Chanan-Khan, MD, Professor of Medicine and former Co-Chairman, Hematologic Malignancies Program, Mayo Clinic Cancer Center.
"MM and CLL are the most common blood cancers in the U.S. and are rarely curable. While treatments extend survival for an average of three to 10 years, deteriorating quality of life remains a challenge due to drug-related side effects. At Starton, we are developing an approach that minimizes the serious side effects patients experience by unlocking the full potential of approved drugs," said Lichtinger. "Our combination with Healthwell will enable us to extend our runway and expedite the development of therapies using our proprietary continuous delivery technology to meaningfully improve patient outcomes. We look forward to working with the Healthwell team, who will add substantial value to the future of our company."
"We are pleased to combine with Starton, whose innovations not only transform lives, but also drive costs out of the healthcare system," said Alyssa Rapp, CEO of Healthwell. "Starton’s experienced leadership team and impressive group of scientific advisors give the Company a competitive edge. We’re confident that Pedro’s track record of sophistication and deep expertise in drug development will help the Company achieve its goals. At Healthwell, we look forward to supporting the Company with an expansive network, operational expertise and public market experience to help accelerate its timeline and ability to deliver value for patients, partners and shareholders."
Dr. Hussein added, "We are excited to continue advancing the work that the entire Starton team has undertaken to improve the use of lenalidomide in MM and CLL for the benefit of patients through its continuous delivery technology. The combination with Healthwell will significantly accelerate Starton’s priorities and allow the Company to conduct programs in parallel to unlock value in multiple indications so as to deliver the transformative potential of its strategic platform to drive significant improvements to the treatment of cancer."
Proceeds from the business combination are expected to be used, among other things, to support Starton’s research and clinical development programs, including:
STAR-LLD in MM is in development for new MM indications in intolerant patients and achievement of superiority versus oral lenalidomide in maintenance treatment of MM. The STAR-LLD delivery system is expected to expand use following discontinuations, dose reductions and treatment by reducing area under the curve (AUC) by more than 50% and a 90% lower CMax. STAR-LLD is in development in two continuous delivery systems: subcutaneous and transdermal.
STAR-LLD in CLL is being developed in multiple indications to establish the only immunomodulatory drug (IMiD) approved for CLL. STAR-LLD is in development in two continuous delivery systems: subcutaneous and transdermal.
STAR-OLZ in chemotherapy-induced nausea and vomiting (CINV) is a 5-day transdermal patch in development for CINV and will be the first product to be evaluated for total control, becoming the first product with a no-nausea primary indication.
Investment Highlights
Enhanced proprietary delivery system leveraging proven continuous delivery technology across a wide range of indications.
Blockbuster potential with a groundbreaking approach to treating multiple myeloma and other hematological malignancies.
Superior PK/PD (pharmacokinetic/pharmacodynamic) profile versus the current standard-of-care, leading to improved drug tolerability and superior patient outcomes.
Significant opportunity to expand the total addressable market by capturing Revlimid intolerant patients.
De-risked opportunity by leveraging FDA-approved blockbuster products with proven active ingredients.
Strong cadence of upcoming catalysts with defined pathway into clinic and a clear path forward to potential approval.
Substantial expansion opportunities with the potential to leverage the existing technology in other approved blockbuster molecules.
Key Transaction Terms
Pursuant to the Business Combination Agreement, Pubco will acquire Starton for aggregate base consideration of $260 million, including $20 million of incentive shares provided to potential PIPE investors, subject to adjustments for debt (net of cash) and certain other adjustments, which consideration shall be payable in shares of Pubco common stock, or shares of a newly created Canadian subsidiary of Pubco ("Exchangeable Shares") that will be issued to certain eligible holders on a tax-deferred basis and which will be exchangeable, on a one-for-one basis into shares of Pubco, with each share valued at the price at which Healthwell redeems its public stockholders at the business combination. Under the Business Combination Agreement, Pubco will also assume all of the outstanding stock options of Starton. In addition, all of the issued and outstanding common stock and warrants of Healthwell will be exchanged for substantially equivalent shares of common stock and warrants of Pubco.
In addition to the base consideration, existing Starton shareholders will have the right to receive contingent earnout consideration in the form of up to 25 million shares of Pubco common stock or Exchangeable Shares, as applicable, payable in three tranches of at least 8.3 million shares, with a tranche earned upon the post-closing Pubco stock price reaching at least $12 for 20 trading days, $14 for 20 trading days or upon achievement of a first clinical milestone (completion of Phase 1b for multiple myeloma), and the Pubco stock price reaching at least $16 for 20 trading days or upon achievement of the successful completion of an FDA required bridging study in healthy volunteers that proves bio-equivalence between the ambulatory subcutaneous pump and either a transdermal patch or an on body subcutaneous pump.
Assuming a HWEL share price of $10.15 and redemptions of 86% of HWEL’s publicly held shares, Starton is expected to have a pro forma enterprise value of $339 million and equity value of $374 million.
HWEL currently has approximately $250 million held in short term U.S. Treasuries in a trust account at JPMorgan Chase Trust. The transaction is expected to bring gross cash proceeds of $50 million, including $35 million in cash expected to be held in trust (assuming 86% redemptions), and $15 million in an anticipated private investment in public equity (PIPE) capital raise.
The Transaction is expected to close in the second half of 2023 and is subject to shareholder approval (as described below), as well as other customary conditions, including receipt of the approval of the British Columbia Court and certain regulatory approvals.
Board and Shareholder Approval
The Business Combination Agreement was approved by the board of directors of each of Starton and the Purchaser, and each recommends that its respective shareholders approve the Transactions. Each of the directors and officers, as well as certain of the shareholders of Starton and the Purchaser have agreed to vote the shares held by them in favor of the Transaction pursuant to voting support agreements, subject to customary exceptions. The shares represented by the parties to the voting support agreements represent approximately 46% of the votes of all of the shares of Starton and approximately 20% of the votes of all of the shares of the Purchaser.
Shareholders of Starton and the Purchaser will be asked to approve the Transaction at meetings of Starton and the Purchaser, expected to be held in the second half of 2023. In connection with such meetings, Starton and the Purchaser will prepare, file and mail proxy statements that will include details regarding the Transaction and the approvals required.
Advisors
SPAC Advisory Partners LLC, a division of Kingswood Capital Partners, is serving as exclusive financial advisor and Fox Rothschild and Dentons Canada LLP are acting as legal counsel to Starton. Jefferies LLC is serving as capital markets advisor to Healthwell and is being represented by Kirkland & Ellis LLP. Ellenoff Grossman & Schole LLP and Peterson McVicar LLP are serving as legal counsel to Healthwell.
Management Presentation
The management teams of Starton and Healthwell will host an investor call on April 27, 2023 at 8:00 am ET to discuss the proposed business combination and review an investor presentation. The webcast can be accessed by visiting: View Source A replay will be available.
For materials and information, visit View Source for Starton and View Source for Healthwell. Healthwell will also file the presentation with the SEC as an exhibit to a Current Report on Form 8-K, which can be viewed on the SEC’s website at www.sec.gov.