Houston biotech Aravive Biologics is going public through a reverse merger with Versartis, a Menlo Park, CA-based company whose lead drug failed a clinical trial last year.
Under the deal, Versartis and Aravive shareholders will each own about 50 percent of the combined company, according to a press release. Aravive will get Versartis’s (NASDAQ: VSAR) NASDAQ listing. Jay Shepard, Versartis’ president and CEO, lead the combined company, which will be based in Houston. The transaction is expected to close during the second half of the year, pending approval by shareholders of each company.
IPOs are the typical path for companies seeking to go public, and the window has been wide open for biotechs over the past several years. But reverse mergers are an option as well, offering an alternative, faster way to Wall Street while avoiding the extra scrutiny from investors and regulators that comes with registering securities. (The downside to reverse mergers, as Xconomy explained here, is overcoming the perception of “backing onto Wall Street.”)
Aravive is the latest biotech to go the reverse merger route. Others to utilize the strategy over the past few years include include San Diego companies Arcturus and Organovo, Houston biotech Oncolix, Austin-based Savara, Lexington, MA-based Pulmatrix, and Enumeral Biomedical, of Cambridge and New York.
Aravive is developing an experimental cancer drug, AVB-S6-500, currently in Phase 1 testing. The drug blocks what’s known as the GAS6-AXL signaling axis, which is implicated in tumor growth. Aravive aims to combine the drug with others to boost their effectiveness. The company, for example, plans to test ABV-S6-500 alongside standard of care therapies in ovarian cancers in the ongoing Phase 1 trial later this year, the press release stated.
Aravive will go public through the shell of Versartis, whose experimental drug for pediatric growth hormone deficiency (pGHD) failed a phase 3 trial in September. Shares of the company plummeted more than 80 percent on the news, eviscerating most if its value. Versartis went public in 2014 in an $126 million IPO, pricing shares at $21 apiece (they now trade at just $1.50).
Aravive was founded in 2016, has raised about $11.4 million in venture capital, and has received a $20 million grant from the Cancer Prevention and Research Institute of Texas (CPRIT.) The company will announce a new ticker symbol at a later date.