Geminiâs fall gives Disc a way around biotechâs IPO slump
Dive Brief:
- Disc Medicine, a privately held startup specializing in drugs for blood disorders, announced Wednesday it will go public through a reverse merger with struggling biotechnology company Gemini Therapeutics.
- The new company will use Disc’s name, be run by its existing management team and advance a portfolio of medicines led by a candidate that’s newly in Phase 2 testing. Disc shareholders will own 72% of the company, while existing Gemini stockholders will hold the remaining 28%.
- In a challenging year for biotechs planning to go public, the reverse merger gives Disc an alternative route to Wall Street, while a concurrent round of financing hands it access to new funds.
Dive Insight:
Current market conditions are preventing many private biotech companies from going public, but where there’s a will, there’s a way. The reverse merger will give Watertown, Mass.-based Disc an infusion of much-needed cash while allowing the troubled Gemini to capitalize on the value of its public listing.
By the time the companies close the deal in the last quarter of 2022, there will be approximately $92 million left in Gemini’s coffers, said Jonathan Yu, Disc’s chief business officer.
Combined with roughly $54 million in new financing from investors including OrbiMed, Atlas Venture and 5 AM Ventures, plus what’s left of a $90 million round from 2021, Disc will have $175 million available by the end of the year, enough to keep the company afloat until 2025.
Disc CEO John Quisel said the company decided against waiting for the right time to file for an initial public offering once the offer from Gemini was on the table.
“We can now control our future and ensure that our molecules are able to complete their clinical course,” Quisel said.
Disc Medicine’s portfolio includes bitopertin, an experimental drug licensed from Roche that turned up poor results against psychiatric disorders like schizophrenia, but showed potential for treating certain rare genetic blood disorders. Bitopertin is now in Phase 2 clinical testing for erythropoietic porphyria, a potentially fatal inherited condition, with Disc announcing the trial’s initiation on Wednesday.
It’s also working on an antibody drug acquired from AbbVie and designed to treat some forms of anemia. One Phase 1b/2 trial evaluating the drug in myelofibrosis patients with anemia is already underway. Disc plans to start a second study in patients with chronic kidney disease later this year.
Funding those clinical trials requires a lot of capital, and that’s where the funds from Gemini come in.
Gemini went public five years after its launch, via an October 2020 merger with a special purpose acquisition company created by investment firm Foresite Capital. Shares began trading in February 2021. The company was working on GEM103, a candidate to treat age-related macular degeneration, among other drug prospects.
But Gemini fell on hard times during the downturn. In October, it cut 20% of its workforce and announced it would focus exclusively on late-stage development of GEM103, ending its early drug research.
That trial never began, however. A strategic review was launched in January and a month later, Gemini’s board of directors appointed a new CEO. The company then let go of 80% of its remaining employees and terminated its work on GEM103.
The new board will include eight directors from Disc and one from Gemini.
“Over the past few years, we’ve learned that there’s a lot of uncertainty in the world,” Quisel said. “This transaction presenting itself now is a great opportunity for us.”
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