Elicio Therapeutics has agreed to merge with struggling Angion Biomedica to give the privately held vaccine maker a new route to Wall Street, which had unsuccessfully attempted an IPO last year.
According to the transaction announced on Tuesday, Elicio shareholders will own approximately 66% of the new company, while Angion shareholders will receive the remainder. The new biotech, named Elicio, will be led by the startup’s executive team and is continuing the development of a cancer vaccine in Phase 1 trials. Angion will also provide Elicio with a $10 million bridge loan.
The transaction is expected to close in the second quarter, after which the shares will trade on the Nasdaq stock exchange under the symbol “ELTX,” the companies said.
The agreement is the latest example of how biotechnology startups are responding to a difficult IPO climate. According to data from BioPharma Dive, only 22 biotechs rated new stock offerings in 2022, down nearly 80% year over year. Some investors don’t expect this trend to change, at least in the short term.
“Maybe there are areas where some companies can go out,” Clare Ozawa, chief executive officer of biotech company founder Versant Ventures, said in an interview last week. “But we definitely don’t rely on that in the current environment.”
IPOs are an important source of funding for growing biotechs and returns for their investors. Without access to these offerings, companies are forced to find other ways to fund their research. Some stay private longer, build more conservatively or enter into partnerships earlier. Companies are increasingly rounding off existing funding rounds because they are struggling to find new investors, some say.
Right now, “it’s just a lot easier to roll over the last round at the same valuation than it is to price a new round,” said Chris Miller, a partner at the law firm Troutman Pepper who works on private finance deals.
Reverse mergers are also an option. Such deals allow a startup to quickly go Wall Street by merging with the shell of a distressed, publicly traded company. They also allow investors in a troubled biotech to bet on the future of a new company. Since last summer, Kineta, Disc Medicine, Enliven Therapeutics, and most recently Carisma Therapeutics have opted for a reverse merger rather than an IPO. (Though Carisma has met some opposition to his plans.)
Elicio outlined plans to go public last June and set terms on an offering the following month that is expected to raise about $40 million. But Elicio canceled the offer in September, reportedly relocating instead to secure funds privately. It wasn’t alone: Several biotechs, including cell therapy developer Artiva Biotherapeutics and gene therapy maker Affinia Therapeutics, changed course last year after initially seeking an IPO.
Elicio’s new direction is a combination with Angion, a biotech company that has lost almost all of its value since raising $80 million in an IPO in February 2021. Angion went public to advance a drug for kidney disease, but halted Phase 2 trials in June over safety concerns and began evaluating strategic alternatives. That search led to a merger with Elicio, which will use Angion’s cash reserves — it had about $55 million on its hands as of the end of September, according to its latest quarterly earnings report — to develop a vaccine against tumors powered by the cancer gene KRAS .
This vaccine, ELI-002, is being tested in a Phase 1 study in patients with a variety of KRAS-related tumors. A second attempt is to begin later this year, the companies announced on Tuesday.
By the time Elicio filed for an IPO last year, he had raised about $65 million in private funds. Clal Biotechnology Industries was the largest investor, holding about 20% of the company’s shares.
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