Drugs Pharma

Redx, Jounce to merge in a $425 million all-share deal

Redx Pharma, based in the UK and Jounce Therapeutics, US, will merge in an all-share transaction worth $425 million to establish a new entity focusing on treating cancers and fibrosis.

HQ Team

February 24, 2023: Redx Pharma, based in the UK and Jounce Therapeutics, US, will merge in an all-share transaction worth $425 million to establish a new entity focusing on treating cancers and fibrosis.

Redx Shareholders will get 0.2105 Jounce shares in exchange for each Redx share. Jounce is planning a reverse stock split of Jounce shares in conjunction with the new entity, Redx Inc., with a ratio of one new share for every five outstanding shares of Jounce.

A reverse split is a share exchange transaction without any impact on the amount of the share capital — only the number of outstanding shares is modified. 

After the reverse split, the exchange ratio will be adjusted to 0.0421 Jounce Shares in exchange for each Redx share, according to a joint statement.

Based on Redx’s fully diluted market capitalisation of £244m ($294m) and Jounce’s expected cash and cash equivalents at completion, the implied market value for the combined group is about $425 million.

Second quarter close

Redx shareholders are expected to own approximately 63%, and Jounce shareholders about 37% of the share capital of the combined group. The merger transaction is expected to close during the second quarter of 2023.

When the deal closes, Jounce is expected to have around $155m of cash and cash equivalents, “which net of any tail and closing costs” results in at least $130m in cash and cash equivalents available to the combined entity. 

With Redx’s expected cash at the closing, Reds Inc. would have a runway into H2 2025.

Jounce plans to cut its workforce by about 57%. After completing the transaction, around 47 Jounce employees will be retained by the combined group at a research and development base in Massachusetts.

Jounce’s clinical programs will only be pursued in-house during the currently ongoing studies, according to the statement.

New entity to be listed

Redx Inc. will be listed on Nasdaq in the US and led by current Redx CEO Lisa Anson. Dr Jane Griffiths, current Redx Chair, will become the non-executive Chair of the combined group.

The board, including Redx and Jounce representatives, will align with the relative shareholding percentages. The combined group will be headquartered at Alderley Park, UK, with a drug discovery and clinical development team in Massachusetts.

The combined group’s highest priority will be the development of RXC007. This selective ROCK2 inhibitor is currently being assessed in a Phase IIa study in idiopathic pulmonary fibrosis (IPF), with topline data expected in Q1 2024.

An inhibitor is a substance that slows down or prevents a particular chemical reaction or reduces the activity of a specific reactant, catalyst or enzyme.

‘Robust pipeline’

“By combining Redx’s proven track record in small molecule drug discovery and development with Jounce’s expertise in biologics and immunotherapy, we will establish a world-class biotech company with a robust pipeline aimed at developing therapeutics for cancer and fibrotic disease,” said Lisa Anson, Chief Executive Officer of Redx Pharma.

“RXC007, our next-generation ROCK2 inhibitor, will lead the clinical pipeline, and we will further investigate opportunities for this asset in cancer-associated fibrosis and other interstitial lung diseases.”

Redx is a clinical-stage biotechnology company focused on discovering and developing novel, small-molecule, targeted therapeutics for treating cancer and fibrotic diseases and the emerging area of cancer-associated fibrosis.

Jounce is a clinical-stage immunotherapy company that develops therapies to enable the immune system to attack tumours and benefit patients through a biomarker approach.

RXC004 is being developed as a targeted treatment for Wnt-ligand-dependent cancers. It is progressing through Phase 2 trials, and RXC008, a GI-targeted ROCK inhibitor for fibro stenotic Crohn’s disease, is expected to enter clinical development in H1 2024.

“While the majority of the combined group’s operations, and its headquarters, will be at Alderley Park in the UK, we believe that listing solely on Nasdaq is the most efficient way to enable us to access a deep pool of risk capital and engage with specialist global investors to support our future growth,” Ms Anson said.

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