ABIO - ARCA biopharma Announces First Quarter 2024 Financial Results and Provides Corporate Update | Benzinga
- ARCA biopharma and Oruka Therapeutics announce Merger Agreement
- ARCA biopharma appoints Thomas Keuer as President
WESTMINSTER, Colo., April 25, 2024 (GLOBE NEWSWIRE) -- ARCA biopharma, Inc. (NASDAQ:ABIO), (the "Company") a biopharmaceutical company applying a precision medicine approach to developing genetically targeted therapies for cardiovascular diseases, today reported first quarter 2024 financial results and provided a corporate update.
In April 2022, ARCA established a Special Committee of the board of directors (the "Board") of ARCA to conduct a comprehensive review of strategic alternatives. As part of the strategic review process, the Company explored potential strategic alternatives that included, without limitation, an acquisition, merger, business combination or other transactions. The Company has and is continuing to explore strategic alternatives related to its product candidates and related assets, including, without limitation, licensing transactions and asset sales.
On April 3, 2024, following a comprehensive review of strategic alternatives, the Company, Atlas Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ARCA ("Merger Sub I"), Atlas Merger Sub II LLC, a Delaware limited liability company and a wholly-owned subsidiary of ARCA ("Merger Sub II") and Oruka Therapeutics, Inc., a Delaware corporation ("Oruka"), entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement"), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub I will merge with and into Oruka, with Oruka continuing as a wholly owned subsidiary of ARCA and the surviving corporation of the merger (the "First Merger") and as part of the same overall transaction, the surviving corporation in the First Merger will merge with and into Merger Sub II with Merger Sub II continuing as a wholly owned subsidiary of ARCA and the surviving entity of the merger (the "Second Merger" and together with the First Merger, the "Merger"). The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Additional descriptions about the Merger Agreement and related agreements were previously disclosed on a Current Report on Form 8-K filed with the SEC on April 3, 2024.
The Company's future operations are highly dependent on the success of the Merger and there can be no assurances that the Merger will be successfully consummated. In the event that the Company does not complete the Merger, the Company may explore strategic alternatives, including, without limitation, another strategic transaction and/or pursue a dissolution and liquidation of the Company.
Separation of Michael Bristow, M.D., President, Chief Executive Officer and Director
Effective April 3, 2024, ARCA and Dr. Michael Bristow, President, Chief Executive Officer and a member of the Board mutually agreed to conclude Dr. Bristow's employment and service as a director.
In connection with Dr. Bristow's separation, ARCA and Dr. Bristow entered into a separation agreement (the "Separation Agreement") on April 3, 2024. Pursuant to the terms of the Separation Agreement, ARCA provided to Dr. Bristow a lump sum payment equal to (i) twelve (12) months of Dr. Bristow's base salary as of the last date of his employment and (ii) a cash payment of $25,000, less applicable withholdings. The severance benefits were conditioned on the non-revocation by Dr. Bristow of a legal release of claims.
ARCA and Dr. Bristow entered into a consulting agreement, effective April 3, 2024 (the "Consulting Agreement"), pursuant to which Dr. Bristow is providing certain consulting services provided for in the Consulting Agreement to ARCA until the earlier of (i) the completion of services under the Consulting Agreement, (ii) a termination in accordance with the terms of the Consulting Agreement, and (iii) upon a Change of Control (as defined in ARCA's 2020 Equity Incentive Plan (the "Plan")). Pursuant to the Consulting Agreement, Dr. Bristow's provision of services under the Consulting Agreement are deemed to be a Continuous Service (as defined in the Plan) and, as a result, his equity awards under the Plan continue to vest during the term of the Consulting Agreement.
Appointment of Thomas Keuer as President
Effective as of April 3, 2024, the Board appointed Thomas A. Keuer, the Company's Chief Operating Officer, to serve as ARCA's President and principal executive officer. Mr. Keuer has been with ARCA since 2006, and as its Chief Operating Officer for the last nine years, a position he will continue to serve in. Mr. Keuer will not receive any additional compensation in connection with his appointment as President and principal executive officer. Mr. Keuer's position will end upon closing of the Merger as previously disclosed on a Current Report on Form 8-K filed with the SEC on April 3, 2024.
First Quarter 2024 Summary Financial Results
Cash and cash equivalents were $35.9 million as of March 31, 2024, compared to $37.4 million as of December 31, 2023. ARCA believes that its current cash and cash equivalents, consisting primarily of money market funds, will be sufficient to fund its operations through the middle of 2025. Our future viability beyond that point is dependent on the results of the strategic review process and our ability to raise additional capital to fund our operations. We expect to continue to incur costs and expenditures in connection with the process of evaluating strategic alternatives. There can be no assurance, however, that we will be able to successfully consummate any particular strategic transaction, including the Merger. The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and we have incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal, accounting and advisory fees and expenses and other related charges.
General and administrative (G&A) expenses were $2.3 million for the quarter ended March 31, 2024, compared to $1.4 million for the corresponding period in 2023, an increase of approximately $0.9 million. During the quarter ended March 31, 2023, ARCA recorded $159,000 for one-time termination benefits related to the mutually agreed to conclusion of Christopher D. Ozeroff's employment, the former Secretary, Senior Vice President and General Counsel of ARCA, effective March 31, 2023. The increase for the three month period was primarily a result of a $1.1 million increase in professional fees primarily related to the Merger Agreement discussed above, offset by $0.2 million lower one-time termination benefits and lower personnel costs from the reduction discussed above in 2023. G&A expenses in 2024 are expected to be higher than those in 2023 as we incur professional fees related to the Merger Agreement discussed above and maintain administrative activities to support our ongoing operations. We expect to incur significant costs related to our exploration of strategic alternatives and the Merger, including legal, accounting and advisory expenses and other related charges.
Research and development (R&D) expenses were $0.2 million for the quarter ended March 31, 2024, compared to $0.4 million for the corresponding period in 2023. The $0.2 million decrease in R&D expenses in 2024 as compared to 2023 was primarily related to decreased headcount and a $0.1 million decrease related to the unrestricted research grants with ARCA's former President and Chief Executive Officer's academic research laboratory at the University of Colorado. There was no expense under these arrangements for the three months ended March 31, 2024. Total expense under these arrangements for the three months ended March 31, 2023 was $0.1 million. In December 2023, the Company made a payment of $125,000 for the grant period July 2022 through December 2023 under these arrangements. As discussed above, the former President and Chief Executive Officer resigned ...