Paragon Spinout Jade to Merge with Aerovate

Jade Biosciences, a privately owned developer specializing in immune disease medications, is set to merge with Aerovate Therapeutics through a reverse merger. This strategic move will enable Jade to enter the public markets swiftly. According to the announcement made on Thursday, Jade is planning to secure $300 million through private financing from over a dozen life sciences investors, which include Fairmount, Venrock Healthcare Capital Partners, RA Capital Management, and Samsara BioCapital.

The newly formed entity will be predominantly owned by the current shareholders of Jade. It will retain the name Jade Biosciences and will be listed on the Nasdaq under the ticker symbol JBIO. The merger is expected to be finalized in the first half of 2025.

Jade is the fourth company spun out from Paragon Therapeutics to go public through a reverse merger, and the third instance happening this year, following Oruka Therapeutics and Crescent BioPharma. Paragon, established by Fairmount in 2021, focuses on discovering new antibody drugs and licensing them to newly formed companies for further development.

For Jade, Paragon has developed an antibody that they believe could become a leading treatment for IgA nephropathy, a kidney disease. This antibody targets the APRIL protein, which is believed to significantly contribute to the disease's progression, ultimately impairing kidney function. Jade's lead product, JADE-001, is designed to offer superior potency and a longer half-life than other anti-APRIL monoclonal antibodies currently being developed. According to Andrew King, Jade's chief scientific officer, this would translate to more effective treatment with less frequent dosing. Jade aims to administer its drug bi-monthly, which is less frequent compared to similar treatments from Otsuka and Novartis, which require monthly or bi-weekly dosing.

The competition in the IgAN treatment space is heating up. Novartis, aside from its own drug zigakibart, acquired another IgAN treatment through its purchase of Chinook Therapeutics last year. Biogen and Vertex Pharmaceuticals also expanded their IgAN portfolios through acquisitions earlier this year. Additionally, Travere Therapeutics and Calliditas Therapeutics have both introduced new treatments for the disease in the U.S.

Despite these developments, Jade's progress is at a relatively early stage. Its primary drug candidate is scheduled to enter clinical trials in the latter half of next year, with results anticipated in 2026. Nonetheless, Jade will be well-financed, thanks to the $300 million raised from pre-merger financing, providing sufficient funds to operate until 2027.

Before the merger closes, Aerovate plans to issue a $65 million cash dividend to its existing shareholders. As of March 31, the company had $99 million in available funds and raised an additional $24 million in April.

Aerovate encountered a significant setback in June when a Phase 2 trial of its experimental therapy for pulmonary arterial hypertension failed to meet its primary endpoint, leading to a sharp decline in its stock price. In July, Aerovate announced it would explore strategic alternatives, including a potential sale or reverse merger.

Post-merger, Jade shareholders will own a commanding 98% of the combined company, with Aerovate shareholders holding a 1.6% stake. Tom Frohlich, the current CEO of Jade, will lead the combined company. The board of directors will feature representatives from Samsara BioCapital, Oruka Therapeutics, and Fairmount, among others.