Alderley Park-based Redx Pharma and Massachusetts-based Jounce Therapeutics have announced a “unanimously recommended business combination” of the two companies via a proposed all share merger transaction.
In a complex proposal, Redx shareholders are expected to own 63% and Jounce shareholders approximately 37% of the share capital of the combined group.
“Based on Redx’s fully diluted market capitalization of £244m ($294m) as at the last practicable date and Jounce’s expected cash and cash equivalents at the time of completion, this implies a market value for the combined group of $425m, before taking into account the value of Jounce’s existing clinical and non-clinical stage programs,” said RedX.
The combined group will be headquartered at Alderley Park in Chesire with a drug discovery and clinical development team in Massachusetts.
Named Redx Inc, the combined group will be solely listed on Nasdaq in the US under the ticker symbol REDX.
Led by current Redx CEO Lisa Anson, current Redx chair Jane Griffiths will become the non-executive chair of the combined group, with the board including representatives from both Redx and Jounce, in line with the relative shareholding percentages.
Anson said: “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.
“RXC007, our next-generation ROCK2 inhibitor, will lead the clinical pipeline, and we will now further investigate opportunities for this asset in cancer-associated fibrosis and other interstitial lung diseases.
“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.”
Under the terms of the merger, Redx shareholders will be entitled to receive 0.2105 Jounce shares in exchange for each Redx share.
Redx Pharma’s biggest shareholder has been San Francisco investment firm Redmile Group LLC with a 73% stake.
Redx Pharma added: “”The business combination is expected to be implemented by way of a Scheme of Arrangement of Redx under Part 26 of the UK Companies Act, immediately preceded by a merger transaction between RM Special Holdings 3, LLC, an entity controlled by Redmile, and Jounce and its affiliates, which together will result in Jounce owning the entire issued and to be issued ordinary share capital of Redx.
“Further details of the Redmile Merger and the ability for eligible Redx shareholders to request that their Redx Shares be transferred to Jounce via a similar merger structure are set out in the Rule 2.7 announcement.
“In connection with the business combination, a non-transferrable Contingent Value Right (CVR) is expected to be distributed to Jounce shareholders that held Jounce shares prior to completion of the business combination and holders of Jounce Share Awards immediately prior to completion of the business combination comprising vested options, relating to certain existing Jounce clinical and non-clinical stage programs.
“The CVRs shall entitle the relevant Jounce shareholders to receive, on a pro rata basis, subject to certain terms and conditions, 80% of the net proceeds resulting from any sale, transfer, disposition, spin-off, or license of certain assets relating to such programs that is consummated within one year following the business combination, subject to one six-month extension term in certain limited circumstances, as set forth in the CVR Agreement.
“The boards of both Redx and Jounce have unanimously recommended that shareholders vote in favor of the business combination.
“In connection with the business combination, Jounce has received irrevocable undertakings from Redx shareholders who together own 76.6% of Redx’s share capital as of 22 February 2023 (excluding the Redx shares held by RM3) and RM3 has entered into the Redmile Merger Agreement conditional on the Court sanctioning the Scheme and will receive the same Exchange Ratio.
“Both Redmile and Sofinnova have agreed to convert all the Redx Convertible Loan Notes held by them respectively as part of the transaction.
“Redx has also received voting and support agreements in respect of Jounce shares, representing, in aggregate, approximately 21.3% of the issued and outstanding share capital of Jounce.
“Full details of the undertakings and voting and support agreements are contained in the Rule 2.7 announcement.
“It is expected that the Business Combination will complete during the second quarter of 2023, subject to satisfaction or waiver of the conditions including approval of the Scheme by Redx Shareholders, Jounce Shareholder approvals, and customary regulatory approvals.”