XenoTherapeutics to Acquire ESSA Pharma in Deal Backed by XOMA Royalty
In a significant move within the biotechnology sector, XenoTherapeutics, a Massachusetts-based non-profit research foundation, has announced a definitive agreement to acquire all outstanding shares of ESSA Pharma. This transaction is supported by XOMA Royalty Corporation, marking a strategic shift for both entities.
ESSA Pharma, facing operational and financial challenges, suspended a major clinical trial in late 2024. This led to increased pressure from activist investors advocating for liquidation. The acquisition offers ESSA shareholders a structured exit, potentially yielding greater value than immediate liquidation.
XenoTherapeutics, known for its work in regenerative medicine and xenotransplantation, focuses on therapies using tissues from genetically engineered pigs. This acquisition aligns with their mission to advance innovative medical solutions.
The deal structure includes a cash payment per share, estimated at $1.91, and a Contingent Value Right (CVR) up to $2.95 million. Shareholders will receive initial cash distributions, with CVR payments extending over 18 months post-closing.
ESSA seeks approval from the British Columbia Supreme Court for an initial cash distribution. The transaction, under a court-approved plan, requires two-thirds shareholder approval and is expected to close in the second half of 2025.
ESSA’s stock responded positively, reflecting investor confidence in the deal’s strategic benefits. This acquisition underscores XenoTherapeutics’ commitment to advancing groundbreaking therapies.
| Term | Detail |
|---|---|
| Buyer | XenoTherapeutics (non-profit, Massachusetts-based) |
| Financing Agent | XOMA Royalty Corporation |
| Per Share Cash Payment | Estimated $1.91 (after expenses, fees, reserves) |
| Contingent Value Right (CVR) | Up to $2.95 million distributed pro-rata within 18 months post-closing |
| Deal Structure | Court-approved plan of arrangement (British Columbia law) |
| Shareholder Approval Needed | Two-thirds majority |
| Timing | Expected closure, H2 2025 |
Deal Structure and Financial Terms
Under the terms of the agreement, ESSA Pharma shareholders will receive a cash payment per share based on the company’s remaining cash at closing, after deductions for transaction expenses, a $4 million transaction fee payable to XenoTherapeutics, a reserve for any remaining liabilities, and legal expenses.
In addition to the cash payout, shareholders will also be granted a non-transferable contingent value right (CVR) for each share. The CVR entitles holders to a proportional share—up to a total of $2.95 million—distributed within 18 months after closing, with the final amount depending on future costs, resolution of any liabilities, and possible litigation outcomes. Additional mechanisms within the CVR structure could deliver further recovery to shareholders, based on outcomes such as excess recovery from litigation or unanticipated reductions in liabilities.
The estimated total payout per share, combining the initial cash distribution and the cash at closing—but excluding additional CVR payments—is about $1.91 per share. This is above the share’s market close of $1.71 prior to the announcement.
Process and Timeline
ESSA Pharma will seek approval from the Supreme Court of British Columbia to authorize an initial cash distribution to its shareholders. This distribution is intended to accelerate the return of capital, even before the transaction officially closes.
The transaction is executed under a court-approved plan of arrangement governed by the British Columbia Business Corporations Act. The deal is expected to be finalized in the second half of 2025, subject to approval by at least two-thirds of ESSA Pharma shareholders.
Strategic Rationale
For ESSA Pharma, the acquisition delivers more certainty and potentially greater total value to shareholders than immediate liquidation would have provided. The prior pressure for winding down operations led ESSA’s management to seek a strategic alternative, culminating in this agreement with XenoTherapeutics.
XenoTherapeutics is known for its focus on regenerative medicine and xenotransplantation, notably advancing therapies based on tissues and organs from genetically engineered pigs.
Additional Details
ESSA’s application for the initial cash distribution, if authorized, means that the bulk of returns would reach shareholders sooner, with the CVR payments extending over an 18-month period as post-deal liabilities and recoveries are resolved.
Share trading in ESSA Pharma responded to the news with notable gains, reflecting positive investor reception.
Summary Table of Key Deal Terms
| Term | Detail |
|---|---|
| Buyer | XenoTherapeutics (non-profit, Massachusetts-based) |
| Financing Agent | XOMA Royalty Corporation |
| Per Share Cash Payment | Estimated $1.91 (after expenses, fees, reserves) |
| Contingent Value Right (CVR) | Up to $2.95 million distributed pro-rata within 18 months post-closing |
| Deal Structure | Court-approved plan of arrangement (British Columbia law) |
| Shareholder Approval Needed | Two-thirds majority |
| Timing | Expected closure, H2 2025 |
Conclusion
The acquisition of ESSA Pharma by XenoTherapeutics represents a strategic move that offers shareholders significant value and certainty. With an estimated $1.91 per share payout and the potential for additional returns through the contingent value right (CVR), this deal provides a more favorable outcome compared to immediate liquidation. The structured payment plan, including an initial cash distribution and subsequent CVR payments, ensures that shareholders receive returns both promptly and over an 18-month period post-closing.
XenoTherapeutics’ focus on regenerative medicine and xenotransplantation aligns well with ESSA Pharma’s innovative approach, promising continued advancement in these fields. The deal’s approval process and expected closure in the second half of 2025 underscore the commitment to a smooth transition, benefiting both companies and their stakeholders. This acquisition not only secures a promising future for ESSA Pharma’s assets but also reinforces XenoTherapeutics’ leadership in groundbreaking medical therapies.
Frequently Asked Questions
What is the estimated cash payout per share for ESSA Pharma shareholders?
The estimated cash payout per share is $1.91, which is higher than the stock’s closing price before the announcement.
What is a Contingent Value Right (CVR) and how does it work?
A CVR entitles shareholders to a proportionate share of up to $2.95 million, distributed within 18 months post-closing. The final amount depends on factors like litigation outcomes and liability resolutions.
Why is this acquisition beneficial for ESSA Pharma shareholders?
The acquisition provides more certainty and potentially greater value than liquidation. Shareholders receive immediate cash and potential future payments through the CVR.
What is the expected timeline for the deal’s completion?
The transaction is expected to close in the second half of 2025, pending shareholder approval and regulatory clearances.
How will the CVR payments be distributed to shareholders?
CVR payments will be distributed pro-rata, based on the number of shares held, within 18 months after the deal closes, depending on the resolution of liabilities and other factors.
