Dive Brief:
- Cell therapy developer Cargo Therapeutics has, after halting its drug development and laying off nearly all its staff earlier this year, agreed to be bought by Concentra Biosciences, a hedge fund-backed acquirer of distressed biotechnology companies.
- Concentra will pay $4.379 in cash per Cargo share under deal terms announced by the companies Tuesday. Cargo shareholders will also receive a so-called contingent value right that will give them any net cash held by Cargo above $217.5 million, as well as 80% of the proceeds from any sale of Cargo’s assets within two years.
- Cargo’s board of directors has agreed to the merger, which the companies expect will close in August. The biotech’s leadership and certain investors in the company are tendering the approximately 17% of Cargo stock they own to the deal.
Dive Insight:
Concentra has honed a takeout strategy targeting “zombie” biotechs, which trade below the value of the cash they have on their books.
Typically, such financial frailty comes after negative clinical trial results or some other major setback to a companies’ research and development efforts. But the biotech stock market weakness of the past few years has meant more and more companies are finding themselves in a similar situation. And at the same time, investors are increasingly demanding these companies shut down and return cash to shareholders, rather than pivoting to a potentially expensive Plan B.
Concentra, which is controlled by Tang Capital Partners, helps expedite this end game. It acquires companies at a premium to their stagnant stock price, keeps a portion of their cash holdings and hands the rest back to investors.
While Concentra’s overtures haven’t always been welcomed by biotech management teams, the company has recently reached deals to buy Elevation Oncology, Kronos Bio, Allakos and Jounce Therapeutics.
For Cargo, the deal brings to a close its attempt to develop cancer cell therapies for people whose tumors have grown resistant to other cellular treatments. Launched in 2021, the company raised nearly half a billion dollars in 2023 between a private financing round and an initial public offering.
But in January, safety concerns forced Cargo to scrap further development of its lead cell therapy candidate and lay off half its staff. Although Cargo initially planned to pivot to other research, a few months later its CEO Gina Chapman exited the company amid another round of layoffs that cut its workforce by 90%.
Cargo had $368 million in cash, cash equivalents and marketable securities at the end of 2024. Its stock price, which fell from around $13 per share to less than $4 after the January update, rose by 5% Tuesday morning on news of the Concentra agreement.
