For privately held biotechs, IPOs are the most common road to the public markets, but they’re not the only way. Reverse merging with a shell company is an alternate path, and that’s how Miragen Therapeutics is headed to the Nasdaq.
Boulder, CO-based Miragen, a developer of drugs that utilize microRNA—small molecular regulators of gene expression—has merged with a diagnostics company called Signal Genetics (NASDAQ: SGNL) in a bid to go public. The combined company will be roughly 96 percent owned by Miragen stockholders, keep the Miragen name, be based in Boulder, and trade on the Nasdaq under the ticker symbol “MGEN.” Signal shareholders will own the remaining 4 percent of the combined company.
Carlsbad, CA-based Signal, whose shares closed at just $0.36 apiece on Monday, aims to sell off its main asset, a multiple myeloma diagnostic called MyPRS. The combined company will thus develop Miragen’s microRNA drugs for blood cancers, fibrosis, and other diseases. Miragen’s two most advanced experimental drugs, known as MRG-106 (for a form of lymphoma) and MRG-201 (fibrosis), are in Phase 1 clinical testing.
Both boards have approved the deal, which has to be sanctioned by a majority of Signal shareholders before it closes (owners of about 26 percent of Signal’s stock have already supported the merger). The new company will be run by Miragen’s current management team, led by president and CEO William Marshall, while Signal’s team, led by Samuel Riccitelli, will step down.
In a separate but concurrent transaction, a group of both new and existing Miragen shareholders—Fidelity Management and Research Company, Brace Pharma Capital, Atlas Venture, Boulder Ventures, JAFCO, MP Healthcare Venture Management, MRL Ventures (a venture fund of Merck), Remeditex Ventures, and others—will pump $40 million into the company. That’ll leave the combined company with over $50 million in cash at the deal’s closing.
Signal and Miragen will host a conference call this morning to discuss the merger.
The perception of reverse mergers is that they’re a way to back onto Wall Street without getting the extra scrutiny from regulators and investors that comes with registering securities in a traditional IPO filing. But they’re also much quicker and less costly to execute than IPOs, and are an alternative to traditional public offerings during a year in which the IPO market has been much more discerning of biotechs than in the recent past. A few examples of reverse mergers over the past few years include Tobira Therapeutics (NASDAQ: TBRA) (recently acquired by Allergan), Pulmatrix (NASDAQ: PULM), Retrophin (NASDAQ: RTRX), and Halozyme Therapeutics (NASDAQ: HALO).
Miragen was formed in 2007 and raised an $8 million Series A round from Atlas and Boulder a year later. The company inked a partnership with French firm Servier on a heart failure microRNA drug and a few other cardiovascular programs in 2011. In a statement, Marshall said the reverse merger and investment proceeds will help bring the company’s drugs into late-stage clinical testing.