Clinical-stage biopharmaceutical firm ARCA Biopharma (NASDAQ:ABIO) — which develops and commercializes cardiovascular disease therapies — saw its shares skyrocket during the midweek session. Earlier this morning, management announced a merger with Oruka Therapeutics, which ultimately aims to address chronic skin diseases. The large and expanding addressable market may bode well for ABIO stock, resulting in today’s big move.
According to the official press release, the definitive agreement involves an all-stock merger. Following the business combination, the resulting entity will focus on advancing Oruka’s pipeline of potentially best-in-class biologics. Upon completion of the merger, the combined firm plans to operate under the Oruka name. As well, ABIO stock will assume a new ticker, “ORKA.”
To finance the deal, Oruka secured approximately $275 million in private financing from a syndicate of healthcare investors. The funding is expected to close immediately, prior to the completion of the merger. Further, the combined entity’s cash balance at closing should support Oruka’s operations through 2027.
What may have piqued additional interest is that ARCA expects to declare a cash dividend to pre-merger stakeholders of ABIO stock, which would be equal to the amount by which ARCA’s net cash exceeds $5 million.
ABIO Stock Drives Higher on a Compelling Opportunity
As stated earlier, a key catalyst for ABIO stock centers on the therapeutic opportunity undergirding the merger. According to Mordor Intelligence, the dermatological therapeutics market is expected to reach a valuation of $45.17 billion in 2024. Experts anticipate that by 2029, the sector could be worth $71.66 billion. If so, the expansion would imply a compound annual growth rate of 9.67%.
Within this therapeutic category, the psoriasis treatment market size is a viable one for Oruka, which is one of its specialties. In 2022, this segment reached a valuation of $26.37 billion. By 2030, the subsector could rise to $51.48 billion, implying a CAGR of 8.8%.
Scientifically, ABIO stock likely jumped on the relevance of Oruka’s co-lead programs. Per the press release, these therapeutics were designed using state-of-the-art antibody engineering, including half-life extension. These attributes enable dosing as infrequently as once or twice a year while potentially delivering superior efficacy than the current standard of care.
Why It Matters
As of this moment, no analyst covers ABIO stock. Since the beginning of the year, shares have gained roughly 90%. However, prospective investors should note that ARCA is a volatile play. In the past five years, shares have lost around 44% of market value.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
