In a significant development in the biotechnology sector, Homology Medicines and Q32 Bio Inc. have officially entered into a definitive merger agreement, marking a strategic move to combine their strengths in the field of genetic and biologic therapeutics. The merger, structured as an all-stock transaction, has, however, led to a sharp and sudden decline in the stock value post-announcement.
Homology Medicines, known for its expertise in genetic medicines, and Q32 Bio, a clinical stage biotechnology company specializing in biologic therapeutics to restore immune homeostasis, are set to create a combined entity that will focus on advancing Q32 Bio’s clinical development candidates for autoimmune and inflammatory diseases.
The stock market reaction to the merger has been notable. The stock, which closed Wednesday’s trading at $0.87, experienced a decline of over 46%, falling to $0.47 after commencing trading on Thursday morning at $0.80. This market response reflects the mixed sentiments and uncertainties surrounding the merger.
At the time of this publication, Homology Medicines Incstock (FIXX) has witnessed a decline.
Homology Medicines Inc
Current Price: $0.48
Change : -0.40
Change (%): (-45.40%)
Volume: 3.5M
Source: Tomorrow Events Market Data
Following the completion of the merger, the combined company will operate under the name Q32 Bio, with its headquarters situated in Waltham, Massachusetts. The new entity is anticipated to trade under the Nasdaq ticker symbol “QTTB.”
To fortify the merger agreement, Q32 Bio has secured a $42 million private placement, garnering support from existing and new investors, including OrbiMed, Atlas Venture, Abingworth, Bristol Myers Squibb, Acorn Bioventures, Osage University Partners (OUP), CU Healthcare Innovation Fund, Sanofi Ventures, Agent Capital, and other undisclosed investors.
Under the terms of the merger agreement, Homology Medicines will issue shares of its common stock to pre-merger Q32 Bio stockholders as part of the merger consideration. Post-merger, Q32 Bio will become a wholly owned subsidiary of Homology Medicines. The ownership structure is expected to see pre-merger Homology Medicines stockholders holding approximately 25% of the combined company, while pre-merger Q32 Bio stockholders are anticipated to own around 75%. However, these percentages are subject to adjustment based on Homology Medicine’s net cash at the time of closing.
In a parallel development, Homology Medicines has ceased the development of its R&D programs, including HMI-103 for the treatment of PKU, and has been exploring strategic alternatives for its programs and platform technology. If Homology Medicines fails to dispose of its ownership position in Oxford Biomedica Solutions, LLC (Oxford Solutions), a contract development and manufacturing organization (CDMO) jointly established by Homology Medicines and Oxford Biomedica plc, Homology Medicines stockholders may be issued a contingent value right (CVR) for each outstanding share.
The merger agreement has received approval from the boards of directors of both companies. More details about the transaction will be disclosed in a Current Report on Form 8-K to be filed by Homology Medicines with the Securities and Exchange Commission (SEC) and made available at www.sec.gov.
Leerink Partners is playing a crucial role as the exclusive financial advisor to Q32 Bio, with Leerink Partners and Piper Sandler serving as placement agents for Q32 Bio’s planned private placement. Legal counsel to Q32 Bio is provided by Goodwin Procter LLP. On the other side of the merger, TD Cowen serves as the exclusive financial advisor, and Latham & Watkins LLP is the legal counsel to Homology Medicines.
Upon the closing of the proposed transaction, the combined company will be led by current members of the Q32 Bio leadership team, with Jodie Morrison as Chief Executive Officer, Shelia Violette, PhD, as Founder & Chief Scientific Officer, Jason Campagna, MD, PhD, as Chief Medical Officer, Saul Fink, PhD, as Chief Technology Officer, Maria Marzilli, MPH, as Executive Vice President, Corporate Strategy & Program Operations, and David Appugliese, JD, as Senior Vice President, Head of People.
The Board of Directors of the combined company is expected to consist of nine members, with seven designated by Q32 Bio and two designated by Homology Medicines. The transaction has received approval from the Board of Directors of each company and is slated to close in the first quarter of 2024, pending customary closing conditions and stockholder approvals.
