Future Arca BioPharma ops ‘highly dependent’ on Oruka merger

WESTMINSTER — The future of  Arca Biopharma Inc. (Nasdaq: ABIO) is “highly dependent” on the successful consummation of its merger with Oruka Therapeutics Inc., the Westminster drug developer said in a regulatory disclosure, and if the deal fails, Arca may pursue “a dissolution and liquidation.”

After two years of searching for a merger partner, Arca inked a deal this month to be absorbed by Oruka, a private dermatology-centered biotechnology firm headquartered in Massachusetts that plans to use the merger to go public. 

The combined company, which is expected to operate under the Oruka Therapeutics banner and trade on the Nasdaq exchange under the ticker symbol “ORKA,” will focus its efforts on Oruka’s existing pipeline of drug candidates for the treatment of chronic skin diseases such as plaque psoriasis and psoriatic arthritis.

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In the run-up to the closure of the merger, expected in the third quarter of 2024, Arca is shuffling its C-suite. Michael Bristow recently stepped down as president and CEO, taking a severance package and a new role as an outside consultant for Arca. 

Thomas Keuer, Arca’s chief operating officer, has taken over as president and primary executive officer, but Arca is without an official CEO. 

“Keuer will not receive any additional compensation in connection with his appointment as president and principal executive officer,” the company said in an SEC filing. “Keuer’s position will end upon closing of the merger.”

Arca, a pre-revenue company, posted a $2 million loss in the first quarter of 2024 — up from a $1.2 million loss in the same period last year — and ended the most-recent period with $35.9 million in cash and equivalents on hand. 

“Arca believes that its 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,” the company said. “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” with Oruka.

“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,” Arca said. 

Oruka said in early April that it has secured commitments for a $275 million private investment to support the merger, as well as pledges from a long line of investors to buy Oruka shares when the deal closes, likely in the third quarter of 2024.

After nearly doubling its year-over-year losses in 2021, Arca Biopharma’s board of directors has established a special committee and hired a consultant tasked with weighing the company’s strategic options for righting the ship.

The company, which told investors in February that it had only enough cash to fund operations through mid-2025, then retained Ladenburg Thalmann & Co. Inc. in May 2022 to “evaluate strategic options, including transactions involving a merger, sale of all or part of the company’s assets, or other alternatives with the goal of maximizing stockholder value,” Arca said at the time. 

Oruka is the third pharmaceutical company to be spun out of Paragon Therapeutics Inc., following Spyre Therapeutics and Apogee Therapeutics. 

The company has two drug candidates that are set to enter clinical trials in 2025, and Oruka leaders expect the new $275 million investment to fund company operations through 2027.