Xoma Acquires Struggling Biotechs HilleVax and Lava Therapeutics in Strategic Consolidation Move
Key Insights
Xoma Royalty Corporation (search) announced dual acquisitions of HilleVax and Lava Therapeutics, both companies that have struggled significantly since their public debuts several years ago.
HilleVax's value plummeted after a mid-stage trial showed its norovirus vaccine was ineffective, leading to program termination and 40% staff cuts.
Lava Therapeutics, which develops gamma delta T cell engager bispecific antibodies for cancer, laid off 30% of staff following disappointing clinical results.
Xoma Royalty Corporation (search) announced Monday the acquisition of two struggling biotechnology companies, HilleVax and Lava Therapeutics, in deals that highlight the growing trend of distressed biotech consolidation. Both companies have faced significant setbacks since going public and represent what industry observers call "biotech zombies" - firms trading at market capitalizations below their cash holdings.
HilleVax Acquisition Details
Xoma offered $1.95 per HilleVax share to investors, along with rights to any additional cash HilleVax holds above approximately $103 million at deal closing. The agreement also includes a portion of any savings on a Boston building lease and 90% of proceeds from the sale of HilleVax's norovirus vaccine programs.
HilleVax went public in 2022 with ambitious plans to develop a vaccine for moderate or severe acute gastroenteritis. Co-founded by Tadataka Yamada, a former Takeda Pharmaceutical (search) executive, and Frazier Life Sciences, the company raised $200 million to advance a vaccine licensed from the Japanese pharmaceutical company.
However, HilleVax's value has plummeted over the past two years following a devastating mid-stage trial that showed its vaccine was ineffective. This failure forced the company to halt development of its lead program in infants, cut 40% of its staff, and seek strategic alternatives.
Lava Therapeutics Transaction
For Lava Therapeutics, Xoma is paying at least $1.16 per share of the Dutch company, with potential additional payments of up to $0.08 more per share. The deal includes a contingent value right worth 75% of net proceeds from partnered programs and any sale of wholly owned pipeline assets.
"We believe the structure of this transaction has the potential to benefit both Lava and Xoma Royalty shareholders over time," said Xoma CEO Owen Hughes in a statement regarding the Lava deal.
Lava's Clinical Setbacks
Lava Therapeutics specializes in developing gamma delta T cell engagers, a type of bispecific antibody for cancer treatment. The Netherlands-based biotech maintains partnerships with major pharmaceutical companies, including programs in development with Pfizer for solid tumors and Johnson & Johnson for blood cancers. The company previously licensed a preclinical prospect to Seagen.
In February, Lava announced a 30% staff reduction following disappointing results from a study of its lead program. CEO Steve Hurly acknowledged at the time that "with only one product in clinical development and an early-stage pipeline," it was "appropriate to investigate strategic opportunities."
Industry Consolidation Trend
The acquisitions reflect a broader pattern in the biotechnology sector, where distressed companies have come under pressure to dissolve and return cash to shareholders or pursue strategic alternatives through reverse mergers or buyout deals.
Concentra Biosciences has emerged as a major player in acquiring these distressed biotechs, completing several deals this year to purchase Cargo Therapeutics, Elevation Oncology, and Allakos. The trend has attracted attention from other investment firms, with KKR recently acquiring a majority ownership stake in HealthCare Royalty Partners, which pursues a similar business model to Xoma.
Earlier this year, Alis Biosciences launched with a new fund specifically aimed at freeing "trapped" capital on biotech balance sheets. Additionally, OrbiMed announced Monday a $1.86 billion fund for "non-dilutive credit and royalty-based financing," indicating growing investor interest in supporting struggling biotechnology companies through alternative financing structures.