Aerpio Pharmaceuticals has announced its entry into a reverse merger agreement with the privately-held Aadi Bioscience. The new entity will operate under the name "Aadi Bioscience, Inc." To support the merger, Aerpio is to raise $155 million in a PIPE deal.

The cash expected from the PIPE financing will fund the company into 2024. It will also be used for the potential approval and commercialization of the company's novel product: FYARRO.

The directors of both companies have approved the merger, which is expected to be finalized in the third quarter of 2021. The PIPE financing will be completed concurrently with the closing of the merger.

Company & Stock Outlook

Following the announcement of the merger, Aerpio shares rose by 17.2% to close at $1.36 on Monday, May 17, 2021. Aadi shareholders will receive Aerpio common stock. 33.2% of the new company will be owned by Aerpio shareholders and 66.8% by Aadi shareholders.

Neil Desai, Aadi's chief executive officer, will head the new company. The company's headquarters will be in Los Angeles, California. The proposed board chairman is Caley Castelein.

Aerpio shareholders will receive a non-transferable contingent value right (CVR) after the merger. At the closing of the merger, Aerpio will enter into a CVR agreement.

The new board will be made of the current Aerpio board members Caley Castelein and Anupam Dalal; Aadi's board members Richard Maroun and Neil Desai; and Aadi's board observer Karin Hehenberger. Behzad Aghazadeh, managing partner of Avoro Capital Advisors will also join the board.

Parties Involved

The PIPE financing will be led by KVP Capital and Acuta Capital Partners. Other institutional investors will be Serrado Capital LLC, Acorn Bioventures, RTW Investments, Rock Springs Capital, Vivo Capital, BVF Partners, Venrock Healthcare Capital Partners, Avoro Ventures, and Avoro Capital Advisors.

The financial advisor for Aerpio for the merger will be Ladenburg Thalmann & Co. Inc. and their legal counsel will be Goodwin Procter LLP. Wilson Sonsini Goodrich & Rosati, P.C. will serve as the legal counsel for Aadi. Piper Sandler & Co and Perella Weinberg Partners LP will be the financial advisors to Aadi for the merger.

Placement agents for the PIPE financing will be Piper Sandler & Co., Cowen and Company LLC, and Jefferies LLC.

Primary Products

The primary product of the new company is FYARRO, which will be used for the treatment of PEComa patients. PEComa is a group of rare tumors that form in the soft tissues of reproductive organs, lungs, intestines, and stomach.

FYARRO is in the late stage of development and has already received Breakthrough Therapy designation and Fast Track designation from the FDA. It will offer significant medical benefits to PEComa patients.

The company's products will focus on precision therapies for genetically defined cancers and compounds that activate Tie2. The customers of the company are cancer patients.

The Bottom-Line

Outlook of the Stock as an Investment

Aadi Bioscience will be a good stock to invest in because the new company will be involved in the development of novel cancer therapies. The global cancer therapies industry is expected to reach $220 billion by 2025, and Aadi Bioscience will have a good chunk of this market.

Aerpio Pharmaceuticals, Inc. - ARPO Stock Chart Technical Analysis for 05-19-2021

Arpo Stock Forecast 2025

Our analysts are increasingly bullish on Aadi Bioscience Inc. price targets are trending upwards over the last 3 months as they increase from 45 to 51 in this time. The average analyst target price at the moment is 51 with a high estimate of 53 and a low estimate of 48. The average 12-month price target currently stands at 49, marking a +203.03% upside from today's closing price.

Aadi Bioscience Inc (NASDAQ:AADI) had its price target increased by analysts at Zacks Investment Research from a previous target price of 43.00 to 49.00 in a research report issued on Thursday, August 3rd. Three research analysts have rated the stock with a sell rating, nine have assigned a hold rating, five have given a buy rating and one has assigned a strong buy rating to the company.