Biotech royalty company XOMA Corporation (NASDAQ: XOMA) has entered an agreement to fully acquire clinical-stage oncology firm Kinnate Biopharma Inc. (NASDAQ: KNTE) in an all-cash deal valued up to $150 million.
This bold acquisition provides XOMA an opportunity to expand its cancer drug royalty portfolio while handing Kinnate shareholders an immediate payday.
For XOMA, the deal delivers two key benefits:
First, it stands to add approximately $9.5 million in cash to the balance sheet, providing extra fuel for future investments and deal-making.
But more importantly, it grants XOMA rights to Kinnate’s pipeline of early-stage oncology candidates. These experimental drugs, if eventually approved, could generate lucrative milestone and royalty payments for XOMA down the road.
Kinnate’s leading assets are two precision medicines in Phase 1 testing – an FGFR inhibitor for cancers driven by FGFR mutations and a pan-RAF inhibitor targeting BRAF and NRAS mutant tumors. Both therapies show promise in initial trials, with additional data expected later this year.
Beyond these advanced assets, Kinnate also boasts alluring preclinical programs in areas like CDK4 inhibition and c-MET inhibition.
For a royalty collector like XOMA, acquiring rights to future royalties on these promising cancer compounds is a savvy move. XOMA’s expertise is striking licensing and royalty deals with biopharma partners. Adding Kinnate’s pipeline to its war chest provides ample new opportunities to flex this deal-making muscle.
And XOMA has a proven track record here. Its lucrative sale last year of royalty rights to the Novartis drug VABYSMO generated over half a billion in cash proceeds. Funneling the proceeds into new royalty streams helps ensure consistent future revenues.
On the flip side, the buyout delivers Kinnate shareholders a decent return amid a downtrodden biotech market. The deal’s maximum price of $2.5879 per share only carries a modest 7% premium over Kinnate’s recent average share price.
But with small-cap biotech valuations crushed across the board, it allows Kinnate investors to cash out at favorable terms compared to remaining standalone. After announcing plans to merge with an unrelated freight company, receiving a buyout provides a more attractive outcome.
Shareholders also retain some upside through CVRs granting them proceeds from any deal for Kinnate’s programs in the year post-buyout.
Importantly, insiders holding nearly half of Kinnate’s shares have signed agreements to tender their stock. This influential support should pave the way to completing the acquisition.
The proposed deal checks all the boxes. XOMA diversifies its royalty portfolio, Kinnate shareholders get paid at a premium, and the cancer drugs have a new catalyst to advance development.
Sometimes simple deals done for the right reasons benefit everyone involved. This cash buyout looks to be just such a win-win-win transaction.
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