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NewLink to merge with private biotech company Lumos Pharma

NewLink Genetics Corp. agreed to merge with Austin, Texas-based private biotech company Lumos Pharma Inc. in an all-stock transaction.

Under the agreement, NewLink will issue common shares to Lumos shareholders in exchange for their shares in Lumos such that they own 50% stake in NewLink after merger.

Following the deal, Lumos will operate as a wholly owned unit of NewLink. The combined company will change its name to Lumos Pharma Inc. and will trade on the Nasdaq under the ticker symbol LUMO.

The combined company will be focused initially on the development of Lumos' LUM-201, a potential oral therapy for pediatric growth hormone deficiency and other rare endocrine disorders.

The board members of both companies and major stockholders of Lumos have approved the transaction. Stine Seed Farm Inc., the largest shareholder of NewLink, has agreed to support the transaction.

NewLink expects to close the transaction in the first quarter of 2020, subject to closing conditions including approval from NewLink's shareholders.

The combined company plans to conduct a reverse stock split as part of the transaction. After completion, Lumos CEO Richard Hawkins is expected to become the CEO of the combined company.

NewLink President Nicholas Vahanian chose to retire from his position and resigned from the company's board.

Ames, Iowa-based NewLink, which develops treatments for cancer, has also started a restructuring plan to reduce operating expenses and align its personnel with the anticipated needs of NewLink after the merger.

Under the plan, the company will cut down its workforce by about 60%, or 28 employees, including several members of management and will incur restructuring charges of about $4.5 million. The workforce reduction and the change in the management team are expected to decrease cash payroll expense by about $5 million to $6 million annually.

Stifel and Cooley LLP are financial and legal advisers for NewLink, respectively. DLA Piper LLP is the legal counsel for Lumos Pharma.