Respiratory biotech Pulmatrix is taking an end-around path to the public market, signing a deal to merge with tiny Ruthigen to better fund its pipeline of inhalable treatments.
Under the deal, Pulmatrix will reverse-merge into Ruthigen, becoming a wholly owned subsidiary of the company and exchanging its debt and equity for 81% of Ruthigen’s outstanding shares. Once the deal closes, the combined company will take on the Pulmatrix name, and some of the biotech’s existing investors will kick in $10 million in exchange for stock. Pulmatrix CEO Robert Clarke will take the reins of the combined company, which will shift its headquarters from Santa Rosa, CA, to Lexington, MA.
The move, pending Nasdaq approval, will give Pulmatrix easier access to capital as it moves forward with a handful of respiratory drugs based on its iSperse platform. Leading the way is PUR0200, a Phase II bronchodilator for COPD, followed by three preclinical inhalants designed to fight infections tied to cystic fibrosis and an early-stage candidate for idiopathic pulmonary fibrosis.
“This transaction represents an excellent opportunity to advance our novel iSperse inhaled dry powder platform and lead CF candidate into clinical development and to meet our long-term growth objective of building a leading company around a robust pipeline for respiratory disease,” Clarke said in a statement.
Pulmatrix’s reverse merger also presents an exit opportunity for its investor syndicate, which includes Polaris Venture Partners, 5AM Ventures and Arch Venture Partners.
As for Ruthigen, the deal would seem to signal the end of the line for the surgical anti-infective RUT58-60, the company’s sole candidate. The California biotech squeaked out a $19 million IPO last year and has seen its shares fall by roughly 50% in the ensuing year. Now, the company is agreeing to the merger in hopes “that the introduction of a new team of scientists and management with a proven track record, as well as Pulmatrix’s new drug development programs, will catalyze significant growth opportunities in the near future,” outgoing CEO Hojabr Alimi said.
By Damian Garde
