Madison Drug Company Cellectar to Merge with Boston’s Novelos

One of the companies awarded investments through the Wisconsin CAPCO Program, Cellectar Inc., has acquired Novelos Therapeutics Inc.:

Cellectar Inc., a Madison pharmaceutical company working on cancer-fighting drugs, has merged with a publicly traded Boston-area firm, Novelos Therapeutics Inc.

The transaction essentially grafts Cellectar’s research onto the upper management of Novelos.

With the merger, Novelos will shift its official headquarters from Newton, Mass., to Madison.

There, a team led by University of Wisconsin-Madison radiology professor Jamey Weichert will continue research into three cancer-targeted compounds dubbed Cold, Hot and Light. Administrative offices will be in Massachusetts.

In the transaction, which is officially an acquisition by Novelos, Cellectar shareholders received about 85% of Novelos’ outstanding stock.

The merged firm then issued additional stock and warrants that were sold for $5.1 million to Madison’s Venture Investors LLC and other investors. Three years ago, Venture Investors led a group that put $13 million into Cellectar.

In February 2010 – well before the transaction with Cellectar – Novelos announced that a cancer-treating drug it was working on had failed clinical trials. Shortly afterward, Novelos discontinued development of the compound.

In a November filing with securities regulators, Novelos said its accountants earlier in the year had raised substantial doubt about its ability to remain in business. The company said then it would begin winding down operations in March if it did not raise new financing.

One of the compounds developed by Cellectar successfully completed initial trials in humans in early 2010.

Novelos’ thinly traded stock is sold over the counter. As of midafternoon Monday, its price was $1.25 a share, down from $3.79 Friday.

Because the complex transaction announced Monday involved a reverse stock split, Novelos will trade under the symbol NVLTD until May 6, when it will revert to Novelos’ regular symbol, NVLT.