Research Non-Profit XenoTherapeutics to Acquire Essa Pharma in Xoma Royalty-Backed Deal

In a surprising turn of events, embattled biotech company Essa Pharma has agreed to be acquired by XenoTherapeutics, a Massachusetts-based non-profit research foundation specializing in regenerative medicines using genetically engineered pigs. The deal, announced on Monday, comes after months of pressure from activist investors urging Essa to wind down operations and return cash to shareholders.

Deal Structure and Shareholder Value

The acquisition agreement offers Essa stockholders a cash payment per share based on the company's remaining cash after expenses and fees. Additionally, shareholders will receive a non-transferable contingent value right (CVR) entitling them to a portion of a $2.95 million pool within 18 months of the deal's closure.

Excluding the CVR, initial estimates suggest that Essa stockholders could receive approximately $1.91 per share, slightly above the company's closing price of $1.71 on the Friday before the announcement. Essa's CEO, David Parkinson, M.D., emphasized that this transaction "delivers cash value to shareholders in an expedited timeframe, with less complexity and value risk when compared to a liquidation."

Xoma Royalty's Involvement and Deal Completion

Xoma Royalty, a biotech royalty aggregator, is providing financial backing to XenoTherapeutics for this acquisition. The deal is expected to conclude in the second half of 2025, pending approval from two-thirds of Essa's shareholders.

Essa's Recent Struggles and Strategic Shift

Essa Pharma's decision to sell comes after a series of setbacks in its drug development pipeline. Late last year, disappointing prostate cancer data led management to halt a phase 2 study and begin exploring strategic alternatives. The company's lead candidate, androgen receptor inhibitor masofaniten, failed to outperform Pfizer and Astellas' blockbuster cancer drug Xtandi in clinical trials.

These challenges prompted activist investor Soleus Capital Management to push for the company's liquidation in April 2025. Despite initial resistance and earlier promises of "significant milestones," Essa's management has now opted for the acquisition route, viewing it as a more certain path to delivering value to shareholders.