Dara BioSciences is taking itself public through a reverse merger with a troubled Boston biotech.
Dara, a privately held biotech headquartered in Raleigh, said it will be acquiring 96.4 percent of the shares of Point Therapeutics (Nasdaq: POTP). The move qualifies as a reverse merger, or the acquisition of a public company by a private company that allows the private company to eschew the long, complex and often expensive process of going through an initial public offering.
Companies often perform reverse mergers when they're having trouble attracting traditional forms of financing, such as venture capital. But Dara BioSciences CEO Richard Franco said his company wasn't having trouble raising money.
"Our balance sheet's in great shape," he said.
Rather, Franco said, Dara thought the drugs in Point Therapeutics' pipeline had some value. Other ways of adding liquidity, such as a VC round, wouldn't have offered access to that pipeline.
"It was an opportunity that presented itself," Franco says. "We pursued it, and we're fortunate to bring the transaction to a close."
Once a promising biotech startup, Point Therapeutics was trading for pennies after the company cut all but a pair of workers and stopped operations after phase III trials of its lung cancer treatment, talabostat, were halted by regulators earlier this year. The company was on pace to be delisted from the Nasdaq Stock Market if it hadn't found a suitor.
Post-merger, the company will go by the name Dara BioSciences. A stock ticker has yet to be determined.
Franco acknowledged that talabostat "didn't do so well" in treating lung cancer. Dara officials think it might have potential in treating chronic lymphocytic leukemia, or cancer in white blood cells, and skin cancer. Dara also is interested in diabetes treatment PT-630, which is in preclinical studies.
Terms of the deal weren't disclosed. But shares of Point Therapeutics closed Tuesday at 5 cents, giving the company a market value of $2 million.
Shares jumped more than 500 percent in trading Wednesday, to 27 cents. By 2 p.m., more than 41 million shares had exchanged hands - higher than the 36 million shares that are freely trading on the public markets, according to Yahoo Finance.
Dara, which has 10 employees, was founded in Destin, Fla. It moved its headquarters to Raleigh in 2005 and closed on $10 million in a $22 million series B round of financing in early 2006.
The company is focused on drugs to treat metabolic diseases, such as diabetes, and central nervous system disorders. Its lead drug candidate, KRN5500, is in phase II trials for the treatment of neuropathic pain, or pain that comes from the nerves.
Franco, for his part, is a veteran of the Triangle life sciences industry. He has been president of Durham biotech LipoScience, leaving the company the same month it abandoned plans for an IPO; prior to co-founding the firm, he was CEO at Morrisville biotech Trimeris.
Dara BioSciences should file a proxy statement with the Securities and Exchange Commission in four to six weeks, Franco says, as a prelude to its reverse merger. The Point Therapeutics acquisition is expected to close in the first quarter of 2008.
