Ligand Pharmaceuticals Incorporated (Nasdaq: LGND) and Channel Therapeutics Corporation (NYSE American: CHRO) announced on Thursday a definitive merger agreement to combine Ligand's wholly owned subsidiaries, Pelthos Therapeutics Inc. and LNHC, Inc., with Channel Therapeutics. The transaction will be supported by $50 million in capital from strategic investors led by Murchinson.
The newly formed entity will operate under the name Pelthos Therapeutics and trade on the NYSE American exchange under the ticker PTHS. Upon completion of the deal, Ligand will invest $18 million in the combined company, while the investor group will contribute $32 million.
Strategic Focus on Zelsuvmi Commercialization
The combined company will primarily focus on accelerating the commercialization of Pelthos' Zelsuvmi (berdazimer) topical gel, 10.3%, which received FDA approval in 2024 for the treatment of Molluscum contagiosum infections in adults and pediatric patients one year of age and older.
Zelsuvmi represents a significant advancement in molluscum treatment as the first and only prescription therapy approved for at-home application by patients, parents, and caregivers. This novel nitric oxide-releasing agent was developed using Pelthos' proprietary NITRICIL technology platform.
"This transaction presents a compelling opportunity to launch a commercial-ready product, with significant financial backing from Murchinson, that has the potential to deliver both near and long-term value to our shareholders," said Todd Davis, CEO of Ligand. "We executed a complex restructuring to acquire the Pelthos assets, incubated the technology that became ZELSUVMI, achieved FDA approval for this first-in-class medication, and assembled a world-class team to bring this therapy to market."
Addressing a Significant Unmet Medical Need
Molluscum contagiosum is a highly contagious poxvirus skin infection affecting an estimated 16.7 million people in the United States. The condition is particularly common among children and can spread through direct contact with infected individuals or contaminated objects.
The infection manifests as raised, flesh-colored or red bumps that can appear anywhere on the body, including the face, hands, trunk, genitals, and other sensitive areas. Patients often experience discomfort from itching, secondary bacterial infections, and social stigma from visible lesions, which typically persist for months and sometimes years.
Scott Plesha, CEO of Pelthos, emphasized the significant unmet need: "There is a significant unmet medical need for an easy-to-use, safe, and efficacious treatment option for molluscum that can be applied by patients, parents, or caregivers at home via prescription. We believe ZELSUVMI will complement healthcare providers' current efforts to treat molluscum while reducing the need for repeated invasive in-office procedures."
Combined Pain Management Portfolio
In addition to Zelsuvmi, the merged company will retain Channel Therapeutics' existing NaV 1.7 development programs targeting various types of chronic pain, acute and chronic eye pain, and post-surgical nerve blocks.
In December 2024, Channel Therapeutics reported positive results from two pre-clinical in vivo models of its nerve block formulations for acute pain, demonstrating material improvements in efficacy and duration compared to the standard of care, bupivacaine. An update on the company's animal efficacy study for its eye pain program is forthcoming.
Frank Knuettel II, CEO of Channel Therapeutics, commented on the strategic fit: "We have performed extensive due diligence on the Zelsuvmi market opportunity and their team and operations, and we believe this is an extraordinary opportunity for current Channel shareholders. Strategically, it provides the potential for near-term revenue generation from an FDA-approved drug, the opportunity to advance Channel's existing NaV 1.7 programs, and expanded capitalization from strong, long-standing investors."
Leadership and Transaction Details
Upon completion of the transaction, Scott Plesha, current CEO of Pelthos, will become CEO of the combined company, while Frank Knuettel II, CEO of Channel Therapeutics, will assume the role of CFO.
The Board of Directors will consist of Mr. Plesha, two independent directors (Peter Greenleaf and Matt Pauls), two board members appointed by Ligand, and two additional independent directors who are current Channel board members.
Ligand will maintain a 13% royalty on worldwide sales of Zelsuvmi, aligning with its business model of generating value through royalty streams from promising pharmaceutical products.
The transaction is expected to close in the summer of 2025, subject to customary closing conditions.
Market Opportunity and Commercial Potential
With molluscum contagiosum affecting millions of Americans and current treatment options often requiring multiple in-office procedures, Zelsuvmi addresses a significant market opportunity. The at-home application capability offers convenience for patients and potentially reduces the burden on healthcare providers.
The combined company will leverage Pelthos' expertise in dermatology with Channel's experience in pain management to build a diversified portfolio addressing multiple therapeutic areas.
"Having commercialized both dermatology and pain management products, I am excited to lead the combined company into this next growth phase," added Plesha.
Latham & Watkins LLP is serving as lead counsel to Ligand, with Raymond James & Associates, Inc. as financial advisor. Sullivan & Worcester LLP is serving as Channel's legal counsel, while Kelley Drye & Warren LLP represented Murchinson.
