Mori Arkin buys stake in US biopharm co NeurogesX: The company has developed a pain relieving patch.

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Aug 24, 2009 (Globes - McClatchy-Tribune Information Services via COMTEX) -- NGSX | Quote | Chart | News | PowerRating -- Moshe (Mori) Arkin has become a party at interest in US biotechnology company NeurogesX, Inc. (Nasdaq: NGSX), both personally through Arkin Holdings Ltd., and through life science hedge fund Sphera Fund GP Ltd. in which he is a partner. He and Sphera have acquired 7.69 percent of the company for $9.5 million.

In the registration documents, Sphera said that it had no intention of trying to take over NeurogesX, nor would it seek any material changes in its management. However, this is a formal statement that does not always rule out future strategic measures by the buyer.

The fact that Arkin also bought NeurogesX shares personally, not only through Sphera, suggests that future strategic moves may be contemplated.

NeurogesX is mostly owned by small shareholders, with two groups each owning 17 percent of the company. Arkin can make an offer to purchase for shares in the company, which has a market cap of $127 million, an amount that he will have no trouble meeting, even if he adds the requisite control premium, should he chose to take such action.

Arkin Holdings partner Menachem Inbar declined to comment on the subject, beyond the company's notice that it is a party at interest in NeurogesX.

Arkin was the controlling shareholder, president and CEO of Agis Pharmaceuticals Ltd., which was founded by his father, and which he sold to Perrigo Company (Nasdaq:PRGO; TASE:PRGO) in 2005 at a company value of $800 million.

Arkin received $400 million in cash and Perrigo shares for his stake in Agis, which made him one of the wealthiest men in the biomedical field. He has invested the money through several channels: personally through Arkin Holdings Ltd.; through Sphera in which he is a partner with Shrem Fudim Group Ltd. (TASE: SFG) and which makes financial investments in publicly traded biomedical companies but plays no management role; and through Accelmed, which he founded a year ago with Uri Geiger, and which invests in medical devices companies that have become bargains because of the recession.

Arkin is also a financial investor in Pontifax Fund, which mainly invests in Israeli drug development companies, as well as in medical device companies. Arkin has also considered investments in other industries, and was part of Ap-Sab-Ar Holdings Ltd. (the Apax Partners-Saban Capital Group Inc.-Arkin consortium), which acquired control of Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ). Arkin served briefly as chairman of Bezeq.

NeurogesX is developing novel pain management therapies for neuropathic pain. Its leading product candidate, NGX-4010, is a synthetic capsaicin-based dermal patch, which selectively targets the pain nevers. Capsaicin is the spice in chili peppers. The company says that brief use of the patch relieves pain in the site for longer periods that current pain relievers on the market, and with few side effects.

The patch is already marketed in Europe for the treatment of herpes, and NeurogesX has filed for US Food and Drug Administration (FDA) approval of the patch for the same indication. The company expects an answer in November. The company is seeking distributors for other countries, but will probably market the patch in the US by itself.

Several analysts have described NeurogesX as a suitable takeover target. It has $60 million in cash, mostly from its $50 million European marketing agreement with Japan's Astellas Pharma Inc. (TSE: 4503). This means that investors value NeurogesX's activity at just $67 million, including the Asetallas agreement, and possible marketing of the patch in the US and other distribution deals worldwide.

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