XTL Biopharmaceuticals, an Israel-based biopharmaceutical development company, has agreed to acquire Kitov Pharmaceuticals, an Israel-based company that researches and develops combination drug products with a focus on hypertension and pain induced by osteoarthritis.

 XTL will allocate shares and warrants to Kitov shareholders representing 19.9% of the company's issued and outstanding share capital upon such allocations. In addition, XTL will pay cash milestone payments throughout the development and business progress, which may add up to $48 million. XTL may pay such payment by issuing its shares representing up to 26.4% of XTL issued and outstanding share capital post the transaction.

Kitov shareholders undertook a voluntary lock-up period in relation to the shares received in the transaction (including shares received upon meeting milestones) for a period of 12 to 24 months from the date of closing, except for part of the milestone payment shares.

XTL agreed to execute a phase III development plan for Kitov's lead drug, investing up to $1.5 million in financing the trial—which will be conducted over an 18-month period. If XTL fails to meet this undertaking, excluding certain cases, the voluntary lock-up period will expire for 50% of the company's restricted shares allocated to Kitov. Kitov estimates it will require an accumulative investment of approximately $9 million for the development of its lead drug and through its approval for marketing.

"We are happy to acquire Kitov with its late stage drugs. Kitov and its experienced team bring a high level of development capabilities, especially Dr. Paul Waymack, who previously worked for the FDA and has been developing drugs for many years," said David Grossman, CEO of XTL.

Upon the completion of the transaction, Waymack, founder of Kitov, will join the board of directors of XTL as active chairman of the board and president. He will be responsible for the clinical and regulatory development of all of XTL's products.

The completion of the transaction is contingent upon meeting several conditions, among others: due diligence; pre-ruling from the Israeli Tax Authority; valuation report for Kitov; approval of the general meeting of the XTL's shareholders; approval of the Tel-Aviv Stock Exchange; completion of the transaction by September 15, 2012.