ZURICH, SWITZERLAND - In a significant move within the biopharmaceutical industry, NLS Pharmaceutics Ltd. (NASDAQ:NLSP), based in Switzerland, and Kadimastem Ltd., listed on the Tel Aviv Stock Exchange as KDST.TA, have announced their agreement for a strategic merger.
The deal, structured as a reverse triangular merger, will result in Kadimastem becoming a wholly owned subsidiary of NLS, with Kadimastem shareholders owning 85% of the combined entity.
The transaction, which is subject to shareholder and Nasdaq approvals, is expected to close by December 31, 2024. Upon completion, the merged company will operate under the Kadimastem name and will continue to be traded on the Nasdaq Capital Market. The merger is anticipated to enhance the development of Kadimastem's cell therapy platform, particularly for neurodegenerative diseases and diabetes treatment.
As part of the agreement, all but one NLS officer and director will resign, and the company's promising Dual Orexin Agonist platform (DOXA) will be developed within Kadimastem's infrastructure. NLS's remaining assets are slated for divestiture under a contingent value rights agreement, with proceeds going to current NLS shareholders.
The binding term sheet has received the approval of both companies' boards of directors, and definitive agreements are expected to be executed in September 2024. The merger aims to capitalize on the synergies between NLS's and Kadimastem's product pipelines, especially in the area of diabetes and sleep-wake dysregulation.
Kadimastem is advancing its AstroRx® product candidate for ALS treatment, which has received FDA approval for a Phase IIa clinical trial in the U.S. The company is also collaborating with iTolerance in the development of a diabetes product, IsletRx, which is approaching pre-Investigational New Drug submission to the FDA.
The merger is seen as a strategic move to increase market visibility and shareholder value by leveraging the U.S. capital markets.
This press release statement provides the basis for the reported details of the merger.
In other recent news, NLS Pharmaceutics Ltd. reported promising preclinical results for compounds targeting Parkinson's Disease, specifically the A53T mutation of alpha-synuclein.
The studies, conducted using Aexon Labs' platform, showed positive effects on neurite outgrowth, a critical measure of neuronal health. Compounds AEX-23, AEX-19, and AEX-24 demonstrated potential neuroprotective benefits, and NLS plans to develop two new successors, AEX-230 and AEX-231, for neurodegenerative disorders.
The Swiss biopharmaceutical company also published a patent application for a new series of molecules targeting narcolepsy and other neurodegenerative conditions, licensed from Aexon Labs. Furthermore, NLS Pharmaceutics presented significant findings from a preclinical study of mazindol at the American Society of Clinical Psychopharmacology, showing potential neuroprotective effects on nocturnal activity disrupted by orexin system damage.
However, NLS Pharmaceutics faces compliance issues with Nasdaq's stockholders' equity requirement, which could lead to the delisting of its securities. To address this, the company has scheduled a hearing with the Nasdaq Hearings Panel.
Additionally, NLS Pharmaceutics launched a registered direct offering and concurrent private placement of securities expected to raise $1.75 million, with H.C. Wainwright & Co. as the exclusive placement agent.
InvestingPro Insights
As NLS Pharmaceutics Ltd. (NASDAQ:NLSP) prepares for its strategic merger with Kadimastem Ltd., it's important for investors to consider the financial metrics and market behavior of NLS. According to InvestingPro data, NLS has a market capitalization of 8.25 million USD, reflecting the size of the company in the current market. Despite the company's efforts to innovate within the biopharmaceutical industry, it has faced financial challenges, as indicated by its negative P/E ratio of -0.68 for the last twelve months as of Q4 2023. This suggests that the company has not been profitable over this period.
Investors should also be aware that NLS's stock price has experienced a significant drop, with a 79.12% decrease in the one-year price total return as of 2024. This volatility is further underscored by a 60.27% decline over the last six months, although there has been a strong return of 34.13% in the last three months. This could indicate a potential rebound or a short-term recovery in investor sentiment.
Two notable InvestingPro Tips for NLS include the company's high price volatility and weak gross profit margins. These factors are crucial for investors to consider, especially in the context of the upcoming merger. The company's stock price often moves in the opposite direction of the market, which may represent an opportunity or a risk, depending on the investor's strategy. Additionally, NLS's short-term obligations exceeding its liquid assets could pose a financial risk, which is essential to monitor in the lead-up to the merger completion.
For those interested in a deeper analysis, there are additional InvestingPro Tips available that can provide further insights into NLS's financial health and market performance. By using the coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro, where they can access a comprehensive list of tips and data to guide their investment decisions.
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