Xoma Royalty, which has recently built a business out of acquiring struggling biotechnology companies, has secured its latest target.
In announcement late Monday, Xoma said it has agreed to pay about $4.29 per share to acquire Generation Bio, a gene therapy developer that’s currently worth less than its cash holdings.
The per-share acquisition price is lower than Generation’s $5.39 closing price on Monday. But Generation’s shareholders will also receive a so-called contingent value right making them eligible to receive additional payments. Among those possible payouts are a share of any cash on hand at closing, if that total exceeds $29 million; savings on a Generation office lease; a piece of future milestones from a licensing deal with Moderna; and the proceeds, if any, should Xoma sell a delivery technology Generation had been working on.
Generation’s board of directors unanimously approved the deal.
Generation raised $200 million in an initial public offering in 2020, riding a boom in new stock offerings that lifted many preclinical drug companies — and gene and cell therapy developers, specifically — onto Wall Street. The company went public in the hopes of advancing a type of next-generation gene therapy technology that relied on lipid nanoparticles, rather than engineered viruses, to deliver their genetic cargo.
But Generation has retrenched several times since. Shares plummeted after disappointing preclinical study results delayed its development timelines in 2021. Though it formed a partnership with Moderna a couple years later, it also laid off 40% of its staff and streamlined research amid a strategic shift.
In August, Generation touted data suggesting its technology could help deliver RNA medicines into T cells. But at the time, it also slashed 90% of its workforce and began a strategic review, citing the early nature of the technology and likely long road ahead. Its longtime CEO switched to board chair shortly thereafter.
Generation, then, fit the profile of the type of “zombie” biotech Xoma has recently begun acquiring and shutting down. Since 2024, Xoma has stepped in with bids for companies such as Turnstone Biologics, Mural Oncology, HilleVax and Lava Therapeutics.
In an interview earlier this year, Xoma CEO Owen Hughes described this strategy as an opportunity for struggling companies to “do the right thing” by shareholders and return invested capital.
“This structure was attractive given the circumstances,” wrote Jefferies analyst Farzin Haque, in a note to clients. While Generation has a “diverse set of assets” with strong intellectual property protection, all of its programs “will require substantial work” to obtain proof-of-concept in humans and “get any value” from an acquirer, he wrote.
Xoma is also harnessing an increasingly popular acquisition tool — contingent value rights — to help bump up the potential total worth of its deals.
