When Galera Therapeutics agreed in April 2026 to combine with Obsidian Therapeutics, Galera's shareholders were left holding about 1.8% of the company that resulted. They also received a contingent value right on the old assets, which may pay them nothing. Obsidian's own investors took 53.2%. The funds that put $350m into the deal took 45%.
The proportions are not unusual. Pre-merger Aerovate Therapeutics stockholders ended with 1.6% of Jade Biosciences, having first been paid a dividend of $69.6m and put through a one-for-35 reverse split. ARCA biopharma's shareholders kept 2.38% of Oruka Therapeutics.
The easy reading is that these were failing companies and failure is expensive. The better reading is arithmetic, and the announcement of the Oruka deal says so outright. ARCA's share of the combined company was, in the language of the release, "subject to adjustment based on the amount of ARCA's net cash at the closing date." The split was not a judgment about what ARCA had built. It was a formula keyed to its bank balance.
ARCA contributed $5m to the combined business and paid about $20m out to its own holders on the way through. Oruka arrived with $275m. Two and a bit points is what $5m bought.
One deal in the set came out differently, and it confirms the rule. When Kalaris Therapeutics merged into AlloVir in March 2025, AlloVir's shareholders kept about 25%, more than ten times what Galera's or Aerovate's received. Kalaris was no better a company than Obsidian and its science was no further along. The difference was that no nine-figure placement came with the deal. The roughly $100m the combined business held at closing came off AlloVir's own balance sheet. A shell that funds the merger keeps a quarter of the company instead of a fiftieth.
The split tracks the money. Whoever pays for the combined business owns it, and a listing on its own is worth about two points.
The same people, three times
Look at who sits on the other side of these deals and the market turns out to be small.
Spyre Therapeutics reached the market through Aeglea BioTherapeutics in 2023 on an oversubscribed $210m placement led by Fairmount. Oruka reached it through ARCA in 2024 on $275m, led by Fairmount and Venrock Healthcare Capital Partners. Jade reached it through Aerovate in 2025 on about $300m, led by Fairmount and Venrock again. All three private companies came out of the same antibody engine, Paragon Therapeutics.
A handful of sponsors and lead investors are running one template, at a price that has climbed by roughly $45m a year. For a founder outside that circle, the useful question is not where to find a listed company. It is whether anyone who runs this playbook will take the call.
Not an alternative to an IPO
The arithmetic ought to change how the transaction is described. A reverse merger is usually presented as one of two doors to the public market, the cheaper and faster one, taken when the IPO window is shut. The lawyers who paper these deals describe something else.
Mintz, advising private companies weighing the route, puts it plainly: "we view a reverse merger as 'going public' during your cross-over round, rather than as an alternative to an IPO," because the process "is a privately negotiated investment process that is more like a cross-over round than an IPO." The mechanical fact underneath is that a reverse merger brings in no cash of its own. The capital has to be raised separately.
Read those together and the sequence inverts. The financing has to exist before a vehicle will have it.
The consequence is unsentimental. A biotech that cannot raise money privately does not become able to raise money by deciding to go public. It arrives in front of the same investors with the same asset in a different wrapper. The structure does not solve a funding problem. It presupposes that one has been solved.
What the ticker costs
The case for the route is real enough. It is quicker than a flotation, the valuation is negotiated rather than discovered in a book, and it does not require a fortnight of hospitable markets.
The costs are discussed less. An IPO arrives with underwriters, and underwriters bring a syndicate, a marketed book and, in the ordinary course, research coverage. A reverse merger brings none of that. The company lands on the exchange with whatever following its investors give it.
There is a further charge, invisible from outside, and it turns on a single question: whether the listed company had become a shell. The Securities and Exchange Commission began pressing that question through comment letters in the second half of 2023, and formalized part of its position in Rule 145a, adopted in January 2024 and effective the following July, which treats a merger between a reporting shell and an operating business as a sale of securities to the shell's own shareholders. Whether a failed biotech counts as a shell turns on the substance of the deal. The staff has weighed whether its purpose was to supply cash and a listing, whether it was accounted for as a reverse recapitalization, whether employees stayed, and whether legacy holders received contingent value rights.
Those are the ordinary features of every deal described above. The penalty does not come from Rule 145a itself but from the shell label it helps fix. A company wearing that label loses the use of Form S-3 for twelve months after it sheds the status, and its investors lose the resale freedom of Rule 144 for the same period. Form S-3 is the shelf registration that lets an established public company raise money in days rather than weeks. To be public without it is to carry a listed company's obligations and only some of its privileges.
Nasdaq waves these transactions through. Its seasoning regime for reverse mergers does not reach them, because the exchange defines a reverse merger as a combination with a shell company and then carves out this exact kind of change-of-control deal with a listed one. Two regulators look at the same transaction, reach different conclusions, and the company lives with both.
Does it work
There is one attempt to measure the outcome and it is not encouraging. In 2022 Tim Opler, then a managing director at the life-sciences bank Torreya, took the 36 reverse mergers announced between January 2017 and May 2020 and compared them with companies that had gone public conventionally. The reverse mergers returned an average of minus 58.9% over two years after adjusting for the market. The flotations beat the XBI biotech index by 30.6%. Some 81% of the reverse mergers underperformed the market within 24 months.
Inside that sits the finding a chief executive should stay with. Deals done alongside a concurrent private placement did worse than deals done without one, minus 63% against minus 54%. On this evidence the money that buys the listing buys nothing after it.
Treat that as a warning rather than a measurement. Opler published the analysis on LinkedIn rather than in a journal, and although he gave the sample and the window, nothing controls for clinical stage, which is the variable most likely to be doing the work. No replication exists. The window also stops in May 2020, so the deals of the years since, including every one described above, sit outside it. Work in other markets points the same way: a 2017 study by Dasilas, Grose and Talias, covering 222 European reverse takeovers between 1992 and 2011, found early gains giving way to long-run underperformance. That corroborates a mood rather than a number.
A deeper problem defeats any comparison of this kind, and better data will not fix it. Companies that can clear an IPO are different companies from those that take a reverse merger. They are further along, better capitalized and better sponsored. Measuring the two groups against each other measures the selection as much as the structure, and nobody has published an attempt to separate them.
The spread matters more than the average in any case, and it is wider than a single figure can carry. Oruka, the company that took ARCA's listing, raised more than $475m across two private rounds inside twelve months. A year after the deal was announced its shares had lost half their value. By the middle of 2026, after a Phase 2a readout, they were worth more than four times what ARCA's had fetched before the deal was struck. Whatever the cohort does on average, individual outcomes run from that to nothing, and the route between the two is not short.
Fewer deals, bigger checks
One set of numbers complicates the standard account of why any of this is happening. Reverse mergers are supposed to be what biotechs do when the flotation market is shut, which implies the two move against each other.
They did not. DealForma counted 31 biotech reverse mergers and SPAC listings in 2023, then 18 of them, worth $5.3bn, in the first three quarters of 2024. By June 2025 Endpoints News could find fewer than five reverse mergers disclosed for the year. Across the same stretch the flotation market was described in the trade press as a drought, broken in September 2025 by LB Pharmaceuticals' $285m debut. Both public routes thinned at once.
Neither closed, though. Gibson Dunn ended 2025 calling reverse-merger activity robust and pointed to the fourth quarter to show it, with Damora raising a $285m placement and Yarrow $200m. Set that beside the Endpoints count and the year resolves into a shape rather than a decline. The number of deals fell. The money inside each one rose.
What grew alongside them was private capital, in negotiated rounds led by specialists, and that is the same money that leads the placements inside these mergers. The route did not close so much as concentrate, into the hands of the few investors able to write a nine-figure check.
So the founder's choice is a private round that may or may not end with a ticker attached.
Which puts the decision back where it started. Ask what the ticker is for. If the answer is that investors want a marked price and a path out, the structure does its job and the cost is legible. If the answer is that the money has not been raised and the public markets might supply it, the figures at the top of this piece are the reply. About 1.8% is what a listing was worth to the last people who owned one.