Stealth handed cloaking device as go-private merger with Morningside advances

Stealth BioTherapeutics has officially been handed its cloaking device thanks to a merger agreement signed with Morningside Venture (I) Investments that will take the mitochondrial dysfunction biotech private once again.

The parties have entered into a definitive merger deal where Stealth will be acquired by a group of investors led by Morningside in an all-cash transaction. Morningside already owned 65% of Stealth before pitching the deal back in June. Stealth has now agreed to the proposal and so has its board.

Originally, Morningside sought to buy Stealth for a 12% premium as of the June 24 closing price for the American Depositary Shares and a 20% premium to the average 30-day trading price at close. But the deal was revised along the way and now represents a 34% premium as of that date for the ADSs and a 44% premium to the average closing price of the ADSs in the last 30 trading days before the transaction was proposed.

The deal is expected to close in the second half of the year, at which point Stealth will leave the Nasdaq and become private once again. As news of the agreement broke, Stealth’s shares spiked nearly 20% to 28 cents, compared to a prior close of 24 cents.

Before the Morningside proposal came forward, Stealth had been evaluating strategic alternatives. The biotech has gone through a series of clinical flops and an FDA refusal, leading to its troubles. But in June, the FDA offered up a glimmer of hope, saying the agency was open to considering new data for the Barth syndrome drug elamipretide.