Arca Biopharma plans to sell off tech, IP as part of Oruka merger

BOULDER — Arca Biopharma Inc. (Nasdaq: ABIO) plans to sell off assets related to its drug-discovery technology and intellectual property as part of its planned reverse merger with Oruka Therapeutics Inc., a private dermatology-centered biotechnology firm headquartered in Massachusetts.

“In connection with the merger, the company will dispose of (or is in the process of disposing of) its legacy technology and intellectual property, including those related to Gencaro (bucindolol hydrochloride) and Recombinant Nematode Anticoagulant Protein c2 (“rNAPc2”),” Arca revealed in its earnings report for the second quarter of fiscal 2024. 

The drug candidate rNAPc2 is “a protein therapeutic in clinical development as a potential treatment for patients with COVID-19,” according to Arca, while Gencaro is a beta blocker.

Oruka revealed to regulators in April its plan to absorb Arca in a reverse-merger deal in which the struggling Westminster-based cardiovascular therapies developer will serve as vessel for taking Oruka public. 

The combined company, which will 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.

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

The merger, which involves a multi-step process involving several subsidiaries, is more complicated than a standard business combination and “is intended to qualify for federal income tax purposes as a tax-free reorganization,” Arca said in its quarterly report.

Arca, which spent the past two years searching for an M&A partner, told regulators in late April that if the Oruka deal fails, Arca may pursue “a dissolution and liquidation.”

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

The company 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. 

Arca posted a net loss of $2.7 million in the second quarter of 2024, up from a net loss of $1.5 million in the same period last year. 

The company has $33.3 million in cash and equivalents on hand. 

“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,” Arca said. “We expect to continue to incur costs and expenditures in connection with the process of evaluating strategic alternatives.”