Alis Biosciences has made a pitch to the hundreds of biotechs that are valued at less than the cash they have in the bank. The investment fund is proposing to buy the companies and return most of their cash to shareholders, offering them an alternative to exits such as reverse mergers and liquidations.
London-based Alis has identified nearly 300 listed, development-stage companies that have experienced clinical, regulatory or commercial setbacks. Collectively, these companies have more than $30 billion on their balance sheets. However, with programs tarnished by failures and investors unwilling to provide more cash, some of the companies are slowly running down their reserves and looking for a way out.
Reverse mergers have offered Nasdaq-listed biotechs a reliable exit route in the past, but the supply of floundering companies now exceeds demand to join the exchange. Liquidation is another option, but there are near-term and ongoing burdens associated with that approach.
Alis is offering another way out. The investment fund plans to approach target companies and discuss their options. Alis will initially provide two options, depending on whether the biotech or the target company’s existing shareholders own its science. In both models, Alis said it will delist the biotech and return around 95% or more of the uncommitted cash to shareholders.
Alis plans to offer a third option to its target companies, but will only do so after seeking a public market listing. Under the third option, the investment fund will keep around 40% of the biotech’s cash to fund clinical development.
The overarching model of buying biotechs to wind them down is reminiscent of the approach taken by Tang Capital Management. Tang is an investment firm that builds stakes in troubled biotechs, offers to buy them outright and, if successful, closes them. Biotechs that take Tang’s offer quickly return cash to shareholders while freeing themselves of the burdens and ongoing liabilities of liquidation.
Alis incorporated in 2023 but only exited stealth Friday. The fund’s pitch appears to have evolved in recent months, with an earlier focus on “giving wings to bioscience ‘fallen angels’” shifting to the current aim of freeing capital trapped in listed biotechs. Annalisa Jenkins, the former head of R&D at Merck Serono, is one of the people behind the investment fund.
Biotech funding dried up as the post-pandemic hangover kicked in and increased interest rates made the high-risk, high-reward world of drug development less appealing. The situation has become even more perilous as upheaval at the FDA has made regulatory timelines unpredictable, forcing at least one firm to drop planned studies, and doubts about the support of foreign investors have emerged.