Last week we discussed the topic of IPOs, or initial public offerings, and when and why a company might decide to go public. Economic factors and a company's perceived strengths or weaknesses can both impact whether a business can run a successful IPO, so it's not surprising in periods where markets struggle that companies might seek different paths to going public. One Colorado biotech firm could offer that path for another company.
Nivalis Therapeutics currently trades on the NASDAQ as NVLS, but it's reportedly floundering after trials of its primary compound failed to show promising results. The company still has another trial up it's sleeve, but if things don't turn round, it could be seeking an acquisition, merger or sale.
Nivalis isn't in terrible financial shape. It reported $50 million in marketable securities and $16 million cash on hand as of September 2016, making it a tempting addition for any entity looking to go public.
Aside from assets and capital, why would another company want Nivalis? Simply put, the value of an existing tie to the public markets can be steep. Another pharmaceutical company could merge with Nivalis, keeping the name and tie to NASDAQ, but bringing on board proprietary compounds and processes that could perform better in clinical trials and have a better chance of making it to market.
This is known as a reverse merger. A smaller or newer company buys into -- or buys out -- an established but floundering company for the brand recognition or IPO shortcut. If you're considering this move from either side of the equation, make sure you protect your business legally. Work with a business law professional to vet any agreement before money and signatures change hands.
Source: Denver Business Journal, "Colorado biotech to streamline operations, explore alternatives after clinical trial failure," Greg Avery, Jan. 03, 2017