TenX Keane (NASDAQ:TENK) has entered into a definitive agreement with Citius Oncology with its parent company Citius Pharma receiving $675 million in equity consideration.

Cranford, New Jersey-based Citius Oncology is developing a leukemia drug that is nearing approval and could see the market by late 2024.

The combined company is expected to trade on the Nasdaq once the deal is completed in the first half of 2024.

Transaction Overview

TenX Keane has its full compliment of IPO shares with an estimated $71.7 million in its trust and a deadline that will last until April 18, 2024.

The 67,500,000 shares Citius Pharma is to receive as compensation are expected to equate to a 90% stake, assuming de minimis redemptions. The remaining 10% of equity is to be made up of TenX Keane public shares and the sponsor’s 1,650,000-share promote.

The parent will contribute $10 million in cash to Citius Oncology and the spinoff entity will retain 12,750,000 options. TenX Keane must maintain at least $5 million in cash in order for the deal to close, $2 million of which must come from its trust.

Citius Pharma may only break off the deal for an alternative transaction before September 30, 2024 if it pays a $5 million fee to TenX Keane.

Quick Takes: Citius Oncology goes into this deal as a fully formed biotech firm with its next steps fairly laid out with the SPAC proceeds standing to be the bridge from this to the next.

Those proceeds may not come in the form of a massive cash war chest, but the fact that its majority owner is already showing the willingness to fund it as needed with $10 million in cash on this deal, there should be more confidence with Citius Oncology’s financial footing than many other firms in the biotech space that try to go it alone as independents.

Also increasing that confidence is the fact that the company’s main drug candidate LYMPHIR, has already been commercialized and marketed in Japan since 2021 under the brand name Remitoro.

Citius licensed LYMPHIR for all geographies except certain East Asian countries that year and it now expects to launch it commercially in those areas under its purview in the second half of 2024.

It still has some approvals to get through however, and regulatory success in Japan does not necessarily guarantee a cake walk through US regulators.

Nonetheless, Citius is confident that it can receive approval, exclusivity and orphan drug designation from the FDA within this timeframe. Lending them confidence is the fact that its original developer, Eisai (TYO:4523) spent 10 years getting it through Japanese clinical trials before eventually licensing it out.

LYMPHIR is designed to treat cutaneous T-cell lymphoma (CTCL), which represents a treatment market worth $300 million to $400 million. It uses a recombinant engineered fusion protein combining interleukin-2 and diphtheria toxins.

While other existing treatments manage CTCL symptoms, this is an area of medicine with no other curative therapeutics on the market. Forty-nine percent of patients dosed with LYMPHIR saw full or partial responses to it within a median of 1.4 months.

Based on the applications Citius filed, it could be eligible for 12 years of marketing exclusivity in its available regions, and, if not, an orphan drug designation would give it seven years.

But, the company plans to continue trials including for treating peripheral T-cell lymphoma (PTCL) in conjunction with other existing treatments. Eisai has already gained approval for precisely this approach in Japan.

Assuming all goes to plan, Citius expects LYMPHIR to be generating revenue for it already in late 2024, and the group has already lined up agreements with four manufacturing and storage partners to aid in this rollout.

A key may simply be time as TenX Keane has the opportunity to potentially get this deal done by April 18 of next year without requiring any further extensions of its deadline.

Doing so might keep redemptions somewhat lower or at least allow it to get to close with a single round of non-redemption or other supportive shareholder agreements.

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ADVISORS

• Company
  • Maxim Group LLC is acting as exclusive financial advisor.
  • Wyrick Robbins Yates & Ponton LLP is acting as legal advisor
• SPAC
  • Newbridge Securities Corporation is acting as exclusive financial advisor.
  • The Crone Law Group P.C. is acting as legal advisor.