Stealth Biotherapeutics is considering taking its business underground in a going-private transaction with Morningside Venture (I) Investments.
The biotech, which has struggled to get its Barth syndrome drug elamipretide before the FDA for consideration, could become private again if it agrees to the transaction from Morningside. The private equity firm has offered to acquire all outstanding ordinary shares not already owned for a little over 2 cents apiece, while outstanding American Depositary Shares will be acquired for 31 cents each.
The offer would represent a nearly 12% premium as of the June 24 closing price for the American Depositary Shares and a 20% premium to the average 30-day trading price at close.
The mitochondrial dysfunction biotech is currently trading at 27 cents per share as of Monday morning with a market cap of $19.9 million.
Stealth previously formed a committee to consider strategic alternatives for the company and will now hire a financial adviser to consider Morningside’s proposal and any other options.
Morningside already owns 65% of Stealth and intends to move quickly if the transaction is approved without typical due diligence “given our knowledge of the company.” If Stealth ultimately chooses to go with Morningside, the deal could be executed with “a superior degree of speed and certainty” and provide “significant value” to shareholders, the firm said.
The offer could be appealing to Stealth, which has gone through a series of struggles over the past few months. The company’s application for elamipretide was rejected by the FDA in October 2021 in an I-told-you-so moment after the company had been advised that the application was not ready. The FDA had not been happy with Stealth’s reliance on a phase 3 study that compared the results with an open-label portion of a different phase 2/3 study and natural history controls.
But Stealth went ahead with the request for approval anyway, and the FDA said no in a refusal-to-file letter.
Then in May of this year, the company’s age-related macular degeneration therapy flopped a phase 2 clinical trial. The therapy had previously failed a phase 3 trial in primary mitochondrial myopathy.
In June, Stealth reported some good news. The FDA was open to a business meeting to consider some new data for the elamipretide application.