May 28, 2025

Should My Biotech Consider a Reverse Merger? How Popular Are They? And Who Are the Leading Reverse Merger Advisors?

Reverse mergers are an alternative option for biotechs seeking to otherwise go public via an IPO. The process has its advantages and disadvantages.

Before we begin, let me start by recounting some wisdom a banker once shared with me: “You’ve seen one reverse merger, you’ve seen one.” What did they mean? That each reverse merger is unique. Yes, there are similarities between each opportunity, but each one is different with its own wrinkles and twists and turns.

How do companies become reverse merger opportunities?

A company (often a biotech given the nature of our industry) typically becomes a reverse merger opportunity when it has no other palatable way of enhancing shareholder value. Often this is after the failure of a lead clinical candidate. The company still has assets – principally its stock market listing, public company infrastructure, and a cash pile – and these are offered up in a process to prospective bidders, following a decision by the company’s board.

Typically, the company then appoints an investment bank to handle a reverse merger process (sometimes alongside a last-ditch attempt to sell the company whole on the back of secondary assets) and a press release is typically issued announcing the formal start of a process.

A memorandum is then sent out to would-be bidders detailing the opportunity – usually including how much cash is expected to be left on the balance sheet at the time the reverse merger is finalized – and asking for solicitations of interest.

In the first instance, bidders fill out a short questionnaire and provide a copy of their corporate deck. The questionnaire asks bidders to value the target’s, cash, and any other assets the acquirer deems valuable (relevant IP for example).

Reverse merger applicants also reveal their own valuation (best substantiated by a recent financing involving dedicated healthcare funds) and detail the additional financing (concurrent PIPE, say) they will bring to the table.

Note: this is what a lot of private biotechs get wrong. A reverse merger isn’t an alternative pathway once you’ve reached a dead-end with your own financing efforts. It is better described as a process that can help supplement them.

A concurrent financing does two very important things: first, it shows the public company that the applicant has supportive shareholders/backers, and secondly the financing crystallizes the value allocated by the applicant to both itself and the publicly listed company.

So, if you’re having trouble raising a $50M Series B or C round, chances are you’re not going to be able to close a $50M PIPE to accompany a reverse merger, which means the tantalizing cash balance on the listed company’s balance sheet is likely out of reach for you.

What kinds of companies win reverse merger processes?

The answer here is – the kind that could have gone public via an IPO, but for whatever reason (speed of transaction, poor market sentiment, etc.) decided to go a different route.

Participating in a reverse merger is a long shot. The most recent reverse merger I was involved in received more than ninety proposals (albeit of varying quality). But those are the odds. Balance that against the amount of time it takes to put a proposal together, and many conclude (often afterwards) that it wasn’t time well spent.

Note also that while reverse mergers offer a “quicker” way to market than an IPO, these processes can often be delayed for a large number of reasons.

Additionally, entities that go public via reverse merger are disadvantaged on a number of fronts:

• Perception – investors tend to believe that reverse merger processes require less disclosure, and that those companies who choose this route wouldn’t have survived the more rigorous diligence required by an S-1-driven IPO process.
• Fewer covering analysts – reverse merger candidates typically use fewer banks in their push to go public. As such, they tend to end up with fewer equity analysts covering them than traditional IPOs (which often have four or even five right out of the gate). This in turn means less people paying attention when you turn over your all-important data cards.
• No greenshoe – unlike IPOs, reverse merger transactions have no overallotment option to stabilize a newly public company’s stock price in the first hours/days of trading.

Of course, in biotech, good data will always win out. If your drug works, analysts will line up to cover you and investors will clamor to buy your stock regardless of the route you chose to go public – but if you’re some time away from unambiguously compelling data, and you need to play the financing game a little while longer, a traditional IPO is more often than not the safest route to eventual success.

How popular are reverse mergers?

From our other blogs, you will have seen that we count 38 biotech/pharma IPOs (each raising gross proceeds of $50 million or more) on the NASDAQ and the NYSE combined between January 1, 2022, and December 31, 2024.

During the same period there were only 11 reverse mergers in which the transaction valued the target (the private company reverse merging into the already public company) at greater than $50 million or more (where specified).

Note: we’re not equating the two (IPO proceeds versus valuation of target/private company in a reverse merger process), we’re just trying to establish a benchmark for the kind of quality transaction you should be interested in.

So, the takeaway here is that reverse mergers are significantly less typical/usual than traditional IPOs.

Source: FactSet

Who are the leading advisors to public companies for reverse mergers?

The following banks were listed as financial advisors to the public company undergoing a reverse merger process (where disclosed).  Anecdotally, Leerink appearing at the top of the table with Wedbush in second place concurs with our own experience.

Bank	Public Companies
Leerink (SVB)	3 (Silverback Tx, Imara Inc., Neoleukin Tx)
Wedbush	2 (Magenta Tx, Aerovate Tx)
Houlihan Lokey	1 (Magenta Tx)
Lucid	1 (ARCA Biopharma)
Oppenheimer	1 (Angion Biomedica)
Piper Sandler	1 (Graybug Vision)
Stifel	1 (Pieris Pharmaceuticals)

Source: FactSet

Who are the leading advisors to private companies for reverse mergers?

Typically, private companies involved in reverse merger processes also hire advisors (for a multitude of reasons, but often because they are involved in the concurrent financing that accompanies most reverse mergers).

The following were the leading advisors (where disclosed) to private companies based on the parameters we’ve already established:

Bank	Private Companies
TD Cowen (Cowen)	2 (Enliven Tx, Neurogene Inc.)
Goldman Sachs	1 (Enliven Tx)
Jefferies	1 (Enliven Tx)
Wedbush	1 (Oruka Tx)
Oppenheimer	1 (Calcimedica)
H.C. Wainwright	1 (Kineta, Inc.)

Source: FactSet

What is the average size of a concurrent financing to a reverse merger?

In terms of the average size of private financings accompanying reverse mergers in the period being considered, the following table summarizes the transaction sizes.

Private Company	Size of concurrent financing ($M)
Jade Biosciences	300
Oruka Tx	275
Enliven	165
Neurogene	95
Palvella Tx	78.9
Dianthus Tx	70
Kineta, Inc.	30
CalciMedica	10.3

Source: FactSet

Note that for all companies other than Kineta and CalciMedica, the amount raised is similar in size to proceeds that might have been raised from a typical biotech IPO. The range in the above table is roughly $10-300 million, with a median amount of $86.95 million.