JNCE - Jounce stock soars ~35% on all-stock merger with Redx Pharma

Jounce Therapeutics ( NASDAQ: JNCE ) is merging with U.K.-based Redx Pharma in an all stock deal after which the combined company will be known as Redx and listed on Nasdaq under the ticker REDX.

The group will be focused on developing therapies for treating cancer and fibrotic diseases, according to the companies.

Under the business combination, Redx shareholders would receive 0.2105 Jounce shares in exchange for each Redx share (the exchange ratio).

Jounce plans to conduct a reverse stock split in the ration for 1-for-5. If the reverse stock split is approved by Jounce shareholders, the exchange ratio will be adjusted to 0.0421 Jounce shares in exchange for each Redx share.

Redx stockholders are expected to own ~63% stake in the group, while Jounce shareholders would own the remaining ~37%.

In connection with the business combination, a non-transferrable contingent value right (CVR) is expected to be distributed to original Jounce shareholders consisting of vested options, linked to certain existing Jounce clinical and non-clinical stage programs.

The news comes just hours after Jounce announced that it would reduce its workforce by ~57% as part of a restructuring.

After completion of the deal, around 47 Jounce employees will be retained by the group at a research and development base in Massachusetts, U.S. The companies added that Jounce's clinical programs will not be pursued in-house beyond the currently ongoing studies.

The combined group will be headquartered at Alderley Park, U.K., with a drug discovery and clinical development team in Massachusetts, U.S., the companies added.

The group will be led by current Redx CEO Lisa Anson, while Jane Griffiths current Redx chair will become the non-executive chair of the group.

The board will have representatives from Redx and Jounce, in line with the relative shareholding percentages.

The companies said their main priority will be developing RXC007 which is being evaluated in a phase 2a study in idiopathic pulmonary fibrosis (IPF), with topline data expected in Q1 2024.

"By combining Redx’s proven track record in small molecule drug discovery and development with Jounce’s expertise in biologics and immunotherapy, we will establish a world-class biotech company with a robust pipeline, aimed at developing therapeutics for cancer and fibrotic disease," said Redx Pharma CEO Lisa Anson.

After completion of the deal, Jounce is expected to have around $155M of cash and cash equivalents, net at least $130M would be available to the combined group.

The cash runway is expected to lead into H2 2025.

Jounce has received undertakings from Redx shareholders who together own 76.6% stake in Redx's (excluding the Redx shares held by RM3) and RM3 has entered into the Redmile merger agreement conditional on the Court sanctioning the merger and will receive the same exchange ratio, the companies noted.

The business combination is expected to be preceded by a merger transaction between RM Special Holdings 3, an entity controlled by Redmile, and Jounce and its affiliates (the Redmile Merger), which together will result in Jounce owning the entire issued and to be issued ordinary share capital of Redx.

Redx has also received voting and support agreements, representing ~21.3% of share capital of Jounce.

The business combination is expected to be completed in Q2 2023, subject to conditions, including approval by shareholders of Jounce and Redx, and regulatory approvals.

JNCE +37.32% to $1.36 premarket Feb. 23

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