Xoma, a drug royalty specialist, buys another ‘zombie’ biotech

Xoma Royalty Corp. is acquiring another struggling biotechnology company in further sign of interest among certain firms in buying floundering drugmakers and shutting them down. Xoma on Wednesday agreed to buy Mural Oncology, a cancer biotech once spun out of Alkermes. Per deal terms, a Xoma subsidiary will acquire Mural for $2.035 per share. Mural stockholders could get up to another $0.205 per share if the company’s net cash holdings at the deal’s closing exceeds $36.2 million. The deal values Mural at the level of its cash reserves and represents a roughly 13% premium to the company’s closing share price of $1.80 on Tuesday. Xoma will wind down Mural’s business afterwards, according to the announcement. In acquiring and liquidating Mural, Xoma is extending a pattern among certain firms and investors to shut down drug companies whose depressed share prices leave them worth less than their cash holdings. Historically, these biotech “zombies” would pivot to new projects or merge with another drug company. Of late, however, investors are heightening pressure on company boards to return cash to shareholders instead. Through investment vehicle Concentra Biosciences, for instance, hedge fund Tang Capital has already bought several struggling companies in recent months, among them Elevation Oncology, iTeos Therapeutics and Kronos Bio. Others, like Pliant Therapeutics and Keros Therapeutics, have faced investor pressure. Investment funds have started up with the specific goal of liquidating flailing drug companies, too. Xoma, which is known for acquiring drug royalty streams, is becoming an active “zombie” acquirer as well. Since June, the company has announced deals to buy Turnstone Biologics, Lava Therapeutics and HilleVax. All three companies had seen their share values collapse following disappointing study results or other setbacks, leading to deal searches and, ultimately, liquidation offers from Xoma. (Xoma also financed a buyout of Essa Pharma in July.) Mural is in a similar position. It separated from Alkermes in 2023 to advance a trio of cancer medicines led by a drug called nemvaleukin. Mural hoped nemvaleukin would succeed where many therapies focused on an inflammatory cytokine called IL-2 had failed. But the drug fell short in multiple studies, leading the company to scrap development and lay off 90% of its workforce in April. It began a strategic search afterwards and, according to the statement Wednesday, found Xoma’s bid the “most effective route to deliver a timely return of value” to shareholders. “We believe that this transaction, which is supported by our board, achieves the goal of this strategic review process, which was to maximize shareholder value,” said CEO Caroline Loew, in the statement.