Immune Pharmaceuticals has completed a reverse merger with the U.S. biotech EpiCept in an agreement valued at between $50 million and $60 million. The deal gives the privately held Israeli biotech public listings in the United States and Sweden, and provides the U.S. company with the financial wherewithal to move its programs forward.

The new company, also called Immune Pharmaceuticals, will be 81 percent owned by Immune shareholders and 19 percent by EpiCept shareholders. The completion of the deal followed the recent 1 for 40 reverse stock split for EpiCept.

Immune Pharmaceuticals was started three years ago in Israel with a focus on antibody therapeutics. It obtained exclusive worldwide rights to bertilimumab for systemic indications, an antibody developed by Cambridge Antibody Technology that was sitting on a shelf at iCo Therapeutics. It also licensed antibody nanoparticle conjugate technology from Hebrew University and began to develop a promising pipeline of targeted therapies in inflammation and orphan indications.

Although it has raised about $8.5 million since its inception from high net worth individuals and family offices, Immune realized a year ago that it had to go outside Israel to raise the capital needed to move its drug programs forward. The United States seemed a good choice as Immune CEO Daniel Teper had moved to Israel from there and many of Immune’s management team were spending nearly as much time in that country as they were in Israel. As a young company without venture investors or corporate partnerships, an IPO didn’t seem possible a year ago, says Teper, so Immune set about looking for a merger candidate that was operational rather than a shell company.

“EpiCept had some financial challenges, including being down-listed in the United States, but was still an operational company with a product pipeline that was active that we believed we could take further in development or with partnerships,” says Teper. “And it had a management team that was complementary to ours. So we thought it was a good fit.”

At the same time, EpiCept, a biotech company listed in the United States and Sweden, was doing all it could to stay afloat. Its board had decided at the beginning of 2012 that it had to partner its lead product either through a direct partnership or through an acquisition of the company’s assets.

A mutual party introduced the two companies in July 2012, and as they talked they realized it made sense to merge. “From EpiCept’s standpoint, it helps us become a financeable organization,” says Robert Cook, interim president and CEO of Epicept, who will become the chief financial officer of the merged company. “The assets of EpiCept, we think, are eminently licensable and more licensable by a company that has financial wherewithal, which we were quickly losing last year. We felt the Immune products provided a great opportunity for our shareholders, not only to get the assets of EpiCept partnered, but also to enjoy the upside from the clinical success of the Immune products going forward.”

The companies signed a merger agreement in November 2012, and have worked since then to close the deal. Bertilimumab will be the anchor of the combined company. It is entering multiple mid-stage studies as a treatment for moderate-to-sever ulcerative colitis, with patient enrollment already begun in Israel and plans to expand study sites to Europe and the United States. Results of the study are expected at the end of 2014. Immune is also planning a study of bertilimumab to treat bullous pemphigoid, a rare autoimmune dermatological condition for which it has received an orphan designation. The disease results in blisters covering the skin and mostly affects the elderly. Bertilimumab targets eotaxin-1, a key chemokine involved in inflammation and immunity. Patients in both studies will be selected based on their biomarker profile.

“We look at bertilimumab as potentially the first treatment of inflammatory disease with a clearly identified biomarker—so personalized medicine,” says Teper. “In all of our trials we are selecting patients based on their eotaxin-1 levels.”

Teper says that targeting eotaxin is a new mechanism of action for inflammatory diseases including Crohns, ulcerative colitis, and severe asthma. “For the first time you can select patients for the biomarker that also happens to be the target of the drug,” he says.

Immune’s antibody nanoparticle conjugate technology, which it calls Nanomabs, has also begun to attract the interest of pharmaceutical companies and Teper expects to be able to announce partnerships in the space in the coming months. He likens Immune’s technology to that of Massachusetts-based Bind. Immune, however, can select patients based on imaging.

“For example, if we have an antibody that targets a particular receptor, we have an imaging antibody that allows us to select the patients and we have a Nanomab to treat those patients,” says Teper. The Nanomab program is in preclinical development.

With the reverse merger completed, Immune Pharmaceuticals now has the ability to tap the public markets to move its programs forward and can negotiate a better partnering deal for EpiCept’s lead compound. As a combined company, both Teper and Cook look forward to being better able to capture the value of their assets.