10X Capital Venture III (VCXB) to Combine with Addimmune in $500M Deal

10X Capital III (NASDAQ:VCXB) has entered into a definitive agreement to combine with clinical-stage biotech firm Addimmune at a pre-money enterprise value of $500 million.

Rockville, Maryland-based Addimmune is a division of American Gene Technologies International that is focused on developing a functional cure for HIV. Its non-HIV assets will be spun off and remain operating under the American Gene Technologies name.

The combined company is expected to trade under the symbol “HIV” once the deal is completed in the first quarter of 2024.

Transaction Overview

10X III has an estimated $41.7 million in its trust after seeing 86.5% of share redeemed in a December extension vote that allowed it to push its transaction deadline up to October 14.

In an effort to further support the deal, 10X III has signed a non-binding letter of intent with Cantor affiliate CF Principal Investments to participate in a committed equity facility worth up to $50 million.

When directed by the combined company, CF Principal would be required to a purchase a specified percent of the daily trading volume of its stock capped at 25%.

This agreement would automatically terminate 18 months after close or once CF Principal has purchased $50 million in shares. Addimmune will also have the right to terminate it early with 10 days’ notice.

Addimmune shareholders stand to gain up to $300 million worth of shares through an earnout split across six potentially triggering events. The first three would distribute shares if company stock trades at or above $15, then $17.50 and $20 for 15 of any 30 trading days within five years of close.

More shares would go out if Addimmune launches any subsequent trial, then when data is collected from that trial and a third trigger if and when it completes the data collection for Phase II trials.

All company shareholders holding a stake of 0.5% or larger in the combined company will be subject to a six-month lock-up. 10X III’s sponsor meanwhile has agreed to a three-year lock-up, but 25% of its shares are to be released 30 days after close. The remaining 75% are to be released at a $12 price hurdle provided it is at least 180 days out from close.

The parties have not yet filed an investor presentation, but 10x Capital III’s profile page will be updated once additional information is made available.

Quick Takes: “Cure” is a big word when it comes to major diseases, but that is the objective Addimmune has set for itself in its efforts against HIV.

As of an update this week, the company has completed the Phase 1 trials of the potential HIV cure it has been developing since 2019. Addimmune’s Phase I trial was the first clinical work it had done with its AGT103-T gene therapies on humans.

It is currently designing its Phase II trials and working to identify potential manufacturers and trial sites. Because Phase II studies require a larger pool of trial participants, Addimmune expects it could receive a limited license to treat some patients with the drug through this process.

If things maintain their current pace, Addimmune expects to complete data collection for Phase II in late 2024 or early 2025. At that point, the FDA will determine if further safety and efficacy studies are needed, but many gene and cell therapies gain a biologics license agreement (BLA) at the end of Phase II.

This would essentially open the gates to Addimmune fully commercializing the drug, but such processes are not always smooth, linear paths.

Nonetheless, 10X III’s sponsor has been a minority investor in Addimmune’s parent company since January 2021 and 10x III Chairman and CEO Hans Thomas noted in the announcement press release that it has been following the company’s progress closely and has confidence in where it is.

That insight may be important as 10X III’s team initially stated it was looking for a target in sectors like consumer internet, ecommerce and other areas being disrupted by SaaS and AI technology. Such a path matched its team of venture capital veterans that have backed high-growth consumer tech firms like Robinhood (NASDAQ:HOOD), PayPal (NASDAQ:PYPL) and Dollar Shave Club.

That background may not seem to be a perfect fit with a pre-clinical drug developer, but it may have also been an imperfect match with Sparks Energy, with which it announced its first transaction. Sparks provides a large workforce of technicians that respond to electrical infrastructure disruptions from storm damage and perform routine maintenance.

This seemed like a safer pick for the market than the sorts of high-growth deals the 10X III team is accustomed to, but the two sides called off the engagement in February without providing further details.

Addimmune may not ultimately share the same shiny consumer focus as many 10X Capital investments, but its goal – curing HIV – does match them in terms of ambition.

ADVISORS

• AGT Advisors:
  • DLA Piper LLP (US) is serving as legal counsel
• 10x Advisors:
  • Roth Capital Partners is serving as financial advisor
  • Latham & Watkins LLP is legal counsel