Consider this: a small biotech pins its hopes on its lead program, which for whatever reason later fails. Then comes along a private player looking for a simpler, quicker and cheaper path to a public listing, by partly or fully swallowing the battered company and providing its investors a minority share of the merged entity as something of a consolation prize. Sound familiar? It should.
In recent months, there have been at least three reverse mergers, in the aftermath of disappointments that have cratered the listed company’s stock. On Tuesday, Vienna-based Arsanis $ASNS — which abandoned its S. aureus pneumonia therapy this June after it failed to pass muster in an mid-stage trial interim analysis — agreed to be the vehicle for Cambridge, Massachusetts-based X4 Pharmaceuticals to list on the Nasdaq.
The Austrian company’s shares on Nasdaq jumped nearly 25% premarket on the announcement.
As part of the deal, X4 Pharma is expected to merge with a subsidiary of Arsanis in an all-stock transaction that will culminate in a combined company, in which current X4 Pharmaceuticals stockholders will hold a 70% share, and Arsanis shareholders will retain the remaining 30%. The merged entity will operate under the X4 name, and focus on the development of X4’s lead experimental drug, X4P-001, in addition to its pipeline of drugs-in-development for rare cancers and immune-mediated diseases.
X4P-001 is expected to be tested in a late-stage trial in patients with WHIM syndrome, a serious, hereditary primary immunodeficiency disease caused by a mutation in the CXCR4 receptor, a pathway X4P-001 is designed to target. The merger, expected to close in the first quarter of 2019, will enhance X4’s R&D arsenal in Europe through Arsanis’ Vienna facility, X4 chief Paula Ragan said.
Arsanis, co-founded by antibody expert Tillman Gerngross, raised $40 million in its IPO last fall after adjusting its price expectations. The company on Tuesday also announced that Michael Gray would take over the role of CEO from René Russo, who has resigned to pursue other opportunities.
The Arsanis-X4 deal follows similar transactions in the space. Battered by a late-stage setback in March, tiny Edge Therapeutics $EDGE on Monday provided cancer immunotherapy company PDS Biotechnology Corp. a vehicle for a quick reverse merger onto Nasdaq. Last week, Israel’s Bioblast $ORPN committed to serving as the shell for the reverse merger of Enlivex Therapeutics. In August, women’s health company OvaScience, which once commanded a billion dollar plus valuation, agreed to merge with Ann Arbor’s Millendo Therapeutics allowing the latter onto the Nasdaq, after Ovascience entered pennystock territory.
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