Virios Therapeutics announces strategic merger and financing

ATLANTA and VANCOUVER, British Columbia – Virios Therapeutics, Inc. (NASDAQ: VIRI), a biotechnology company, has entered into a definitive share exchange agreement with Sealbond Limited, an affiliate of Wex Pharmaceuticals Inc., under the umbrella of CK Life Sciences Int'l., (Holdings) Inc. (CKLS). This transaction will result in a combined entity named Dogwood Therapeutics, Inc., which will be listed on NASDAQ under the ticker symbol DWTX starting from October 9, 2024.

The merger is part of a strategic move to advance the clinical development of three key assets: Halneuron®, a non-opioid treatment for chemotherapy-induced neuropathic pain (CINP) currently in Phase 2b; IMC-1, ready for Phase 3 development for fibromyalgia; and IMC-2, in Phase 2 development for Long-COVID sequelae. Dogwood Therapeutics will lead the charge with an experienced management team and Board of Directors.

In conjunction with the merger, Virios Therapeutics has announced a reverse stock split of 25-for-1, effective on the same day as the ticker symbol change. This reverse stock split aims to bring the company in compliance with Nasdaq listing requirements.

The financing involved includes $19.5 million in committed debt by an affiliate of CKLS, which will be disbursed in two tranches. The first $16.5 million will be provided at closing, with an additional $3 million expected in the first quarter of 2025. This funding is anticipated to sustain research and operations through significant milestones, including the expected interim analysis of the Halneuron® Phase 2b study in the second half of 2025.

Existing VIRI stockholders will be granted a contingent value right (CVR), which ties potential future cash payments to milestones associated with corporate partnering transactions for IMC-1 and IMC-2. The next major update for investors is the top-line results from the IMC-2 Long-COVID Phase 2a study, expected in early fourth quarter of 2024.

Based on a press release statement, the companies involved aim to leverage FDA Fast Track designations for IMC-1 and Halneuron® to expedite the development of these treatments. Halneuron® has shown promise as a non-opioid approach to treat CINP, potentially addressing a significant unmet medical need.

The announcement of the merger and financing details was made public today, and a webcast presentation to discuss the transaction was scheduled for 8:30 a.m. Eastern Time. The information presented is based on a press release statement and has not been independently verified.

InvestingPro Insights

As Virios Therapeutics (NASDAQ: VIRI) embarks on this transformative merger, InvestingPro data provides additional context to the company's financial position. With a market capitalization of just $4.7 million, VIRI is currently operating at a small scale, which aligns with its status as a biotechnology company focused on drug development.

The company's financial metrics reflect the challenges typical of early-stage biotech firms. InvestingPro Tips indicate that VIRI "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," suggesting a degree of financial stability in the near term. This liquidity position could be crucial as the company navigates the merger process and continues its clinical development programs.

However, investors should note that VIRI "is not profitable over the last twelve months," with an adjusted operating income of -$4.8 million for the last twelve months as of Q2 2024. This aligns with another InvestingPro Tip stating that "analysts do not anticipate the company will be profitable this year." These factors underscore the importance of the announced $19.5 million in committed debt financing, which is expected to fund operations through key milestones.

The stock's performance has been challenging, with InvestingPro data showing a one-year price total return of -79.14% as of the latest data. This decline is reflected in the InvestingPro Tip noting that the "stock price has fallen significantly over the last year." The upcoming reverse stock split and merger may be seen as strategic moves to address these market challenges and position the company for future growth.

For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for VIRI, providing a deeper understanding of the company's financial health and market position.

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