Histogen, Timber Pharma Plan Reverse Mergers to Join Public Markets

Xconomy San Diego — 

Two privately held biotechs on Tuesday announced plans for reverse mergers, transactions that provide a faster route to go public than a conventional IPO and also give struggling public companies a chance to recoup some value for their shareholders.

San Diego regenerative medicine company Histogen announced an agreement to gain a Nasdaq listing through a merger with Conatus Pharmaceuticals (NASDAQ: CNAT). That biotech, also based in San Diego, cut its staff by 40 percent and said it would explore strategic options last summer after its experimental treatment for nonalcoholic steatohepatitis failed to beat a placebo in a mid-stage clinical trial.

The deal would result in Histogen stockholders owning about 74 percent of the combined business, and Conatus stockholders owning about 26 percent. Under the terms of that merger, a proposed all-stock deal, the combined company would trade under a yet-to-be-determined stock symbol.

Histogen’s pipeline includes a preclinical treatment to promote new hair growth in patients with male pattern hair loss, a dermal filler, and a treatment for cartilage damage in the joints. The company plans to start human tests of the three programs this year.

The deal still needs the approval of stockholders of both Histogen and Conatus. The boards of directors of each company have recommended approval.

Also Tuesday, Woodcliff Lake, NJ-based Timber Pharmaceuticals, which launched last year to develop treatments for rare dermatologic diseases, announced an agreement to merge with San Jose, CA-based BioPharmX (NYSE American: BPMX), which has been trading in penny stock territory since last year.

Timber is looking to the public markets to provide access to capital for its investigational drugs, which include a proprietary topical formulation of isotretinoin for the treatment of some patients with congenital ichthyosis, a group of disorders that lead to abnormally dry and scaly skin. Another drug in the pipeline, a proprietary topical formulation of rapamycin, is being developed to treat facial bumps associated with tuberous sclerosis complex, a genetic condition characterized by the growth of benign tumors in many parts of the body. Both are in Phase 2b testing.

Timber also has a preclinical program testing a potential treatment for localized scleroderma, an autoimmune disorder that causes too much collagen to be produced, resulting in skin inflammation and thickening.

As part of the deal, Timber agreed to secure at least $20 million of financing for the combined company. According to the merger agreement, “Timber members,” which include the investors who kick in the $20 million, would own about 88.5 percent of the combined company; BioPharmX stockholders would own about 11.5 percent.

If all goes as planned, Timber says it plans to evaluate the best path forward for BioPharmX’s investigational treatment for acne and rosacea, which is ready to enter Phase 3 testing.

The deal, slated for completion in the second quarter, still needs approval from BioPharmX’s stockholders and Timber’s members.