UPDATE 2-MediciNova to buy Avigen for $37 mln

Fri Aug 21, 2009 11:38am EDT

* Offer of $1.24/shr in cash or secured convertible notes

* Price represents 7 pct discount to Avigen's Thurs close

* Sees deal closing in Q4

* Avigen shares fall 8 pct, MediciNova falls 4 pct (Recasts; adds details, share movement)

Aug 21 (Reuters) - Biopharmaceutical company MediciNova Inc (MNOV.O) said it would buy embattled rival Avigen Inc AVGN.O, whose lead drug failed in a mid-stage trial last year, in a deal valued at about $37 million.

The offer of $1.24 a share, in either cash or secured convertible notes, represents a 7 percent discount to Avigen's Thursday close.

Avigen shares hit a low of $1.23 before recouping some losses to trade down 4 percent at $1.28 Friday morning on Nasdaq, while MediciNova shares were trading down 4 percent at $6.20.

According to the terms, about $1.19 of the consideration will be paid to Avigen shareholders at the closing of the deal and about 5 cents will be paid on June 30, 2010, subject to certain adjustments.

The secured convertible notes will be convertible on the final business day of each month into MediciNova common stock at $6.80 per share.

In addition, Avigen stockholders will be entitled to one contingent payment right that will give them the right to receive certain other payments.

Avigen, which fell into tough times after its experimental drug for the treatment of spasticity associated with multiple sclerosis failed in a mid-stage trial last October, received an offer from MediciNova in December and the two companies reached an understanding in June on some key terms of the deal.

MediciNova, which is currently testing eight compounds in ten different indications, also has a multiple sclerosis drug called MN-166 in its pipeline.

The deal is expected to close in the fourth quarter, pending stockholder approvals.

RBC Capital Markets is acting as a financial advisor to Avigen, while Ladenburg Thalmann & Co is advising MediciNova, the companies said in a statement. (Reporting by Esha Dey in Bangalore; Editing by Anne Pallivathuckal)