Endocyte insiders to reap millions from Novartis deal

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The top 15 executives and directors of Indiana-based biotech Endocyte Inc. could rake in $177 million as a result of the deal to sell their company to Swiss pharmaceutical giant Novartis AG.

Some of them could also reap millions more in severance pay and stock options, according to information the company disclosed in an Oct. 31 securities filing.

That could shower huge riches on Endocyte insiders on a scale not seen in Indiana in years.

Other major deals that generated huge payoffs for Indiana insiders in recent years include ExactTarget’s sale to Salesforce.com in 2013 (with $640 million going to insiders) and Guidant Corp.’s sale to Boston Scientific in 2006 (with $673 million going to insiders).

The following is a breakdown of money that will accrue to some of the Endocyte insiders, based on shares owned (including options exercisable within 60 days) based on a $24 a share sale price:

•    Michael A. Sherman, Endocyte CEO: $17.9 million.
•    Michael T. Andriole, Endocyte chief financial officer: $1.37 million.
•    Dr. Alison A. Armour, Endocyte chief medical officer: $2.84 million.
•    Christopher P. Leamon, vice president of research: $10.9 million.
•    Katherine K. Parker, vice president of human resources: $3.26 million.
•    John C. Aplin, chairman of the board: $3.3 million.
•    Colin Goddard, director: $2.3 million.
•    Marc D. Kozin, director: $2.45 million.
•    Philip S. Low, co-founder, director, chief science officer: $20.8 million
•    Patrick Machado, director: $210,048
•    Fred A. Middleton, director: $104.4 million (including shares held by entities affiliated with Sanderling Ventures and other funds, over which he has ultimate voting and investment power)
•    Lesley Russell, director: $2.65 million.

In addition to these shares, several insiders also own huge additional blocks of stock options, worth tens of millions of dollars more.

The top three owners stand to receive even a larger share of the sale proceeds. The largest shareholder is RA Capital Management LLC of Boston, which owns about 5.86 million shares, worth about $140.7 million

The second-largest shareholder is Partner Fund Management LP of San Francisco, which owns about 5.2 million shares, worth $124.6 million.

The third-largest shareholder is Venrock Healthcare Capital Partners II LP of New York City, which owns about 4.3 million shares, worth about $103.2 million.

Outside investors will also reap a big payday. The $2.1 billion deal, at $24 a share, represents a premium of 54 percent to Endocyte’s closing price of $15.56 the day before the deal was announced on Oct. 18.

Just a year ago, Endocyte shares were trading at $1.41 each, following multiple setbacks and restructurings.

Early Indiana investors include Indianapolis venture firms CID Capital, Clarian Health Ventures and the Indiana Future Fund.

But how much those funds—or their successors—hold today is unclear. None are listed on Endocyte’s list of owners who hold at least 5 percent of the company’s stock.

CID Capital said it distributed its Endocyte stock to investors after the company went public in 2011. “The investors then were able to decide how they wanted to manage their Endocyte stock,” said John Aplin, managing director of CID Capital and chair of Endocyte’s board of directors.

Another early investor was the Indiana Future Fund, a $73 million “fund of funds” launched by the life sciences initiative BioCrossroads in 2003.

BioCrossroads said it did not invest in the Indiana Futures Fund, which is managed by Carlyle Group out of Washington, D.C. Officials there did not return phone calls to IBJ to comment on whether the fund still holds significant shares in Endocyte.

Yet another early investor was Clarian Health Ventures, which has since dissolved.

Endocyte’s lead compound is an experimental drug for prostate cancer called 177Lu-PSMA-617, which it acquired from German chemical company ABX GmbH last fall. The compound is in late-stage clinical trials.

Endocyte was formed in December 1995. The West Lafayette-based biotech has been trying to develop “smart” cancer drugs for more than two decades. The deal is expected to close in the first half of 2019.

The company is based in Purdue Research Park, where it has about 50 employees. Another 40 employees work on the north side of Indianapolis.

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