Elevation Oncology has agreed to be acquired by Concentra Biosciences, an investment vehicle controlled by hedge fund Tang Capital Partners, in a deal that highlights the growing trend of liquidating struggling biotech companies rather than attempting strategic turnarounds.
Acquisition Terms and Structure
The cancer drug developer accepted Concentra's bid of $0.36 in cash for each Elevation share on Monday. Stockholders will also receive a contingent value right equal to 80% of proceeds from any future deal involving the company's sole remaining drug prospect, EO-1022, subject to certain time constraints. Additionally, shareholders will receive all net cash at closing exceeding $26.4 million.
The offer has received full support from Elevation's board of directors and is expected to close in July, pending shareholder approval.
Shifting Investment Climate for Biotech "Zombies"
Elevation's acquisition represents the latest example of a fundamental shift in how investors approach public biotech companies that have suffered significant setbacks. Many of these companies now trade for less than their cash reserves, earning them the designation of biotech "zombies."
Historically, such companies would typically pivot their strategy or merge with privately held counterparts. However, investors have begun more aggressively scrutinizing these struggling biotechs, pressing their boards to return cash to shareholders rather than continue operations.
Pattern of Biotech Liquidations
Recent months have witnessed multiple companies announcing dissolution plans, including Third Harmonic Bio and iTeos Therapeutics. Other biotechs facing investor pressure include Acelyrin, Essa Pharma, Pliant Therapeutics, and Keros Therapeutics.
Multiple investment funds now specifically target floundering biotechs for acquisition and liquidation. Through Concentra, Tang Capital has already acquired several struggling companies, including Allakos, Jounce Therapeutics, and most recently, Kronos Bio.
Elevation's Decline and Strategic Review
Elevation went public in 2021 during the initial public offering boom but subsequently faced significant challenges. The company's lead drug disappointed in clinical testing, ultimately forcing management to shelve the program and lay off a majority of staff before beginning a strategic review.
The biotech's shares have traded below $1 per share for nearly a year. In April, investment firm and shareholder BML Capital Management called for the company to liquidate and return all cash to stockholders, citing the current state of equity markets and the "abysmal performance" of many recent reverse mergers.
The acquisition of Elevation demonstrates how investment strategies have evolved to capitalize on the challenging biotech investment environment, with specialized funds now focusing on extracting value through liquidation rather than operational turnarounds.
