Rare disease player that went public in biotech's go-go years merges with specialty pharma in all-stock deal — at a fraction of the debut price
Strongbridge Biopharma went public in the summer of 2015, the tail end of a biotech boom on Nasdaq, with a solid pitch. Almost 20 years old at that time, it was to focus on in-licensing, developing and then commercializing treatments for rare diseases that it believes has potential to be franchises in the US and the EU with a tiny salesforce. RA Capital, New Enterprise Associates and Longwood Capital were among its investors.
That was good enough for raising $25 million at $10 apiece. Six years later, with one approved therapy in its portfolio, it’s selling for the equivalent of $2.72 per share in an all-stock deal.
Technically, Strongbridge is merging with Xeris Pharmaceuticals, whose specialty is formulating drugs into ready-to-use injections, such as a glucagon injection they market as Gvoke. But it is the Xeris brand that will live on. For each Strongbridge share, stockholders will be receiving 0.7840 shares of Xeris — which, based on its closing share price last Friday, translates to a 12.9% premium to Strongbridge’s $2.41.
Add a $1 CVR contingent upon sales milestones, and the deal values Strongbridge at $267 million.
According to the company’s latest 10-Q, it will also bring roughly $73.9 million in cash and cash equivalents to the table. Strongbridge has spent the past few years shedding the last ties to its diabetes roots and remaking itself as a rare disease focused company, quickly flipping the growth hormone drug Macrilen to Novo Nordisk just months after acquiring it from Aeterna Zentaris back in 2018.
The two companies disclosed in an SEC document that they began talks earlier this year. Paul Edick, CEO of Xeris who will also head the combined entity, said the merger adds an “attractive rare disease portfolio and capabilities.”
“Through this combination with Xeris, we will gain additional scale and financial resources to better meet the unmet needs of those we serve,” said Strongbridge CEO John Johnson, who will now become a board member of Xeris.
In addition to Keveyis (dichlorphenamide), a treatment for a neuromuscular disorder called primary periodic paralysis that brought in $30.7 million in 2020 and $8.4 million in the first quarter of 2021, Strongbridge has recently put levoketoconazole in front of the FDA, with a PDUFA date set for the first day of next year.
The drug has come a long way. Originally dubbed COR-003, the cortisol synthesis inhibitor (which was a single enantiomer of the old drug ketoconazole) had already entered Phase III back in 2015 for Cushing’s syndrome.
Strongbridge’s original plan for seeking regulatory approval, according to its F-1, was slated for the second half of 2017.