No Product, No Sales, No Prospects? Consider a Reverse Merger

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When all else has failed and a publicly traded company has no product and no prospects, it still has one thing that is worth a pot of gold — its listing.

These shell corporations are becoming sought after by companies looking to go public through reverse mergers — where a private company takes over a public one — as investors remain weary of initial public offerings, especially for biotechnology companies.

Biotech companies are often on the other side of the reverse merger as well, after their failure to develop a new drug or treatment sends their shares slumping, making them attractive acquisition targets. What’s more, many have money left in the bank from unused capital. And there are a surprising number of them. Capital IQ estimates around 130 such firms among listed biotechs that could be prime targets for reverse mergers.

Nasdaq-listed Talaris Therapeutics Inc. said in June that it agreed to merge with Tourmaline Bio, after the death of a patient last year prompted the company to review and then discontinue two clinical trials in kidney transplant tolerance in February and pause its third and final trial the following month. Talaris reported cash and cash equivalents of $181.3 million as of the end of 2022.

Recent deals also incorporated private investments in public equity, or PIPEs, allowing companies to tap new funds, on top of the listed company’s cash.

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