Korro Bio merges with off-pitch Frequency, hits Wall Street with $117M

Reverse mergers are all the rage as cash-depleted public biotechs search for viable next chapters, with Korro Bio and Frequency Therapeutics the latest to fuse. 

After two bouts of layoffs this year, Frequency Therapeutics is handing off its Nasdaq baton to Korro Bio, merging in an all-stock transaction, according to an announcement Friday. The new company will carry on Korro’s name and its development plans, focusing on a package of RNA editing programs.

To supercharge its efforts, Korro has raised an additional $117 million in financing from the likes of Atlas Venture and Fidelity, among others. The company is expected to have $170 million on-hand when all is said and done, enough to last into 2026. 

Frequency shareholders will own 8% of the company while Korro shareholders, including those jumping into the pre-merger financing, will own 92%. This ownership breakdown may ultimately change if and when the deal closes, contingent on how much money Frequency has at that point. To that end, Frequency has discontinued the preclinical development of its remyelination program to treat multiple sclerosis. If Frequency fails to find a method of monetizing that program before the deal closes, existing Frequency shareholders will have the option to exchange a contingent value right for cash in the event that the program is eventually sold off.

It’s a soft landing for Frequency after sputtering in recent weeks, marked by two rounds of layoffs that each reduced the company’s workforce by 55%. The layoffs followed a phase 2 failure of the company’s hearing loss treatment, prompting the company to ax both FX-322—the med that failed—and a second hearing loss candidate, FX-345. The layoffs were meant to afford Frequency the time to produce clinical trial results of the remyelination med. 

Korro is reaching Wall Street’s shores less than four years after being pushed out to sea by Atlas Venture in October 2019, led then by Intellia co-founder Nessan Bermingham. Just a year later, the company secured over $90 million in a series A funding round to advance several programs in the clinic. However, despite the passage of a few years, the company is still at least one year away from asking regulators to greenlight a phase 1 trial of its lead asset, aimed at treating Alpha-1 antitrypsin deficiency.

Indicative of the current market’s tighter private financing conditions, the $117 million raised by Korro now is roughly the same as the $116 million series B raised in January 2022. According to data from Cooley, up-rounds in the first quarter of the year showed a continued decline from the fourth quarter of 2022, accounting for 73% of rounds compared to 79% in the previous quarter. Cooley also said that flat rounds in the first quarter represented 12% of deals, which they deemed as the highest number recorded in the history of their quarterly venture capital reports.