Tranzyme Pharma, a struggling Durham drug-development company, is merging with privately held Ocera Therapeutics and moving its headquarters to California.
The all-stock deal will result in Ocera shareholders owning a majority of publicly traded Tranzyme.
Tranzyme CEO Vipin Garg will leave the company after the merger closes. Linda Grais, president and CEO of San Diego-based Ocera, will head the merged company, while Frank Rousseau, Tranzyme’s chief medical officer, will lead the company’s clinical and regulatory operations from the Triangle office.
Susan Sharpe, a Tranzyme spokeswoman, said the company doesn’t anticipate any changes to its Triangle workforce. As of March 18, Tranzyme had 29 employees, according to regulatory filings.
Under the terms of the merger, Ocera’s investors will purchase $20 million in Tranzyme stock. Tranzyme shareholders will own 27.4 percent of the company, with Ocera shareholders owning the rest.
Tranzyme is also effecting a reverse stock split as part of the merger in an attempt to satisfy minimum listing requirements on the Nasdaq and avoid being delisted. Tranzyme shares closed Wednesday at 55 cents, up 3 cents.
Tranzyme has no products on the market and has struggled with disappointing test results for its experimental drugs over the past year. In February, the company hired investment banking firm Stifel to consider “the possibility of a merger, sale, other form of business combination, or other transaction to maximize value to its shareholders.”
Garg declined to comment Wednesday. In a statement, he said the merger with Ocera offered the best value for Tranzyme’s shareholders.
“We expect the merger will benefit from the substantial synergies of the combined management team’s extensive experience in drug development, specifically in hepatology, which will help accelerate the transition and allow for efficient execution of the development plan,” he said.
Ocera has raised more than $60 million in venture capital. The company is developing a drug, OCR-002, to treat hepatic encephalopathy, a rare liver condition. The drug was given orphan status by regulators in the United States and Europe, a designation granted to drugs that treat rare conditions for which there are few adequate therapies.
Ocera hopes to begin Phase 2 testing of OCR-002 later this year.
Tranzyme’s stock has lost more than 80 percent of its value over the past year. The stock dropped 76 percent in November after the company reported that preliminary trial results showed that its experimental treatment for debilitating gastrointestinal problems triggered by diabetes and other diseases performed no better than a placebo.
Last month, Tranzyme reported a net loss of $4.9 million for the fourth quarter, down from $8 million during the same period in 2011. Revenue declined from $2.2 million to $1.6 million, which the Durham company attributed to changes in the amortization period for deferred revenue from its collaboration with Bristol-Myers Squibb.
The two companies’ collaboration, which dates to December 2009, calls for Bristol-Myers to continue development of promising compounds. Tranzyme could receive up to $80 million in milestone payments for each drug-development program stemming from the collaboration.