X4 Pharmaceuticals to Become Public via Reverse Merger with Arsanis

Edward Kim  |

Biotechnology sector followers may be keenly aware of the troubled trip of Arsanis ASNS over the past 12 months. The company went public in November 2017, raising $46 million in gross proceeds at $10.00 per share for a post-IPO market valuation of $143 million. The stock traded above $28 this past spring on the promise of its pneumonia therapeutic, but the bottom fell out in June when the company halted its Phase 2 trial after an interim analysis by an independent data review committee determined that it would be futile to continue. Companies that emerge on the wrong end of these critical binary risk events frequently seek a merger candidate to help salvage the remaining assets, and to this end, Arsanis has been able to chalk up a save for its remaining shareholders.

Arsanis and X4 Pharmaceuticals announced a merger agreement today in an all stock deal under which the combined company will emerge with the X4 Pharmaceuticals name to focus on the development and commercialization of X4’s pipeline of treatments for rare diseases of the immune system and rare cancers. X4's lead candidate has completed a Phase 2 trial in WHIM syndrome [(Warts, Hypogammaglobulinemia, Infections, Myelokathexis (retention of neutrophils in the bone marrow)], a serious genetic immunodeficiency disease.

Symptoms usually begin in early childhood, according to the Genetic and Rare Diseases Information Center of the NIH, with respiratory infections, cellulitis and other recurrent bacterial infections. In later childhood, individuals develop widespread warts that often become persistent, and warts in the genital area may eventually cause cancer. WHIM is caused by a mutation in the CXCR4 gene, which codes for proteins that regulate cell growth and division. X4's pipeline is designed to antagonize the CXCR4 pathway to restore healthy immunity.

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Source: Arsanis presentation, Nov. 27, 2018

Current X4 shareholders are expected to own approximately 70% of the combined company, with Arsanis shareholders owning the remaining 30%. Paula Ragan, PhD, President, CEO and co-founder of X4 will become President and CEO of the combined company. Dr. Ragan previously led strategic partnering efforts for Genzyme’s SNY Rare Disease business. René Russo, PharmD, Arsanis' President and CEO, has resigned "to pursue other opportunities." The deal is expected to close in the first quarter of 2019.

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Source: X4 Pharmaceuticals

Arsanis stock has doubled on the merger news to $2.40 in mid-afternoon trading, which brings market valuation to about $30 million. This proposed merger appears to be a good outcome from what may not have been a plethora of options for Arsanis and its shareholders. In its presentation this morning to discuss the transaction, management stated that it believes WHIM syndrome represents a $500 million market opportunity, with the entire pipeline potentially worth north of $1 billion. The combined company will be worth watching for progress in the Phase 3 trial in WHIM syndrome and further validation of the scientific approach as it applies to the balance of the rare disease pipeline.

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