In May 2023 Concentra Biosciences, a vehicle backed by Tang Capital, offered $5.75 a share for Atea Pharmaceuticals, a 55% premium to where the stock had closed the day before. Atea's board said no. The offer undervalued the company, the directors explained.
By the arithmetic the market was using, there was not much company left to undervalue. Atea belonged to a population that had grown strange. In the summer of 2022 Jefferies counted 128 small- and mid-cap biotechs in North America whose shares were worth less than the cash in their bank accounts. The historical norm, going back to 2007, was fewer than 45. Bloomberg, using a broader universe, put the number closer to 200. By late 2023 AlphaWatch reckoned that more than 30% of listed biotechs sat below cash, and that seven in ten carried an enterprise value under $100m.
A share price below net cash is a peculiar verdict. It says a company's scientists, its executives and its clinical programs are together worth less than nothing, and that shareholders would do better if the business stopped, paid out what remained and went home. In most industries the condition is brief, because somebody moves to correct it. In biotech it has lasted years. The reason has less to do with capital markets than with an exchange rule that almost nobody outside the deal business has read.
Some boards do the obvious thing. SQZ Biotechnologies sold its assets to STEMCELL Technologies and put a plan of liquidation to shareholders, who approved it in February 2024. The certificate of dissolution followed in Delaware the next month. That is the orderly ending. It is also the rare one.
More often nothing much happens. The lights stay on, payroll runs, and the money shareholders might have received pays instead for the upkeep of a company with nothing left to develop.
Liquidation as a service
An industry has grown up to fix this from outside. Gibson Dunn's 2026 life-sciences outlook gives the practice a name: liquidation-as-a-service. Concentra alone made at least seven approaches in 2025, after a quieter 2024, having earlier bought Jounce Therapeutics for $95.6m.
Look at what the bidders require. Concentra conditioned its approach to LianBio on the company holding at least $515m in cash at closing. Its March 2026 offer for CARGO Therapeutics paired $4.38 a share with a contingent value right entitling holders to any cash above $217.5m, plus 80% of whatever the assets fetched over the next two years. XOMA Royalty's purchase of Generation Bio in December 2025 carried a similar right, keyed to savings on an office lease and to proceeds from a Moderna license, with more cash if the company closed holding above $29m.
None of these conditions concerns the science. They concern the balance sheet, to the dollar. What the bidders want is the gap between what a company holds and what its board has failed to distribute. The drugs are incidental.
What the Nasdaq rule actually says
The other way out is the reverse merger, in which a private biotech takes over a listed company, assumes its ticker and reaches the public market without an IPO. Seven such deals closed in the first half of 2026, carrying some $1.9bn of concurrent financing, against 13 conventional IPOs raising about $4bn.
Chief executives weighing this route almost always start in the same place. Where do I find a shell? The rulebook suggests a better question, which is what the buyer has to bring with it.
Nasdaq does not let a listing pass quietly from one business to another. Under Rule 5110(a), a combination with a non-Nasdaq entity that produces a change of control forces the surviving company to apply for initial listing from scratch, early enough for the exchange to finish its review before the deal closes. Miss that and Nasdaq starts delisting proceedings. The ticker survives. The listing has to be won again, against the standards that face any company at an IPO.
Those standards are financial: stockholders' equity, market value, share price, public float. A private biotech with good science and an empty balance sheet cannot meet them. One arriving with $200m of committed capital can. That is why the money comes first and the vehicle second, and why a company that cannot raise privately does not become a candidate simply by deciding to go public.
A harsher regime sits next door, and the reason it does not apply is worth knowing. Rule 5110(c) makes a company formed by a reverse merger wait a year before it may even apply, trading over the counter or on another exchange throughout, filing reports the whole time. But Rule 5005(a)(39) defines a reverse merger as an operating company combining with a shell company, and then carves out the transactions described in Rule 5110(a). The back-door listing is exempt by definition. Nasdaq restated the point in a rule filing of its own in July 2025.
So the exchange waves these deals through on their financial merits. The Securities and Exchange Commission is less relaxed.
In January 2024 the commission adopted Rule 145a, effective that July, treating a merger between a reporting shell and an operating business as a sale of securities to the shell's own shareholders. The heavier penalty travels with the shell label itself: a former shell may not use Form S-3, and its investors may not rely on Rule 144, for a year after it sheds the status. Whether a failed biotech counts as a shell for that purpose turns on the substance of the deal. The staff has weighed whether the point of the transaction was to hand a private company cash and a listing, whether it was accounted for as a reverse recapitalization, whether employees stayed, and whether legacy holders received contingent value rights.
Read that list again in a moment. Nearly every feature that makes a reverse merger attractive is also evidence that the target was a shell.
The financing is the asset
Once the rule is visible, these deals stop looking like acquisitions. They look like auctions in which the currency is committed capital.
When Aeglea BioTherapeutics combined with Spyre Therapeutics in 2023, Cooley put the implied value of Spyre itself at about $110m. The concurrent private placement, led by Fairmount Funds Management and joined by more than a dozen other investors, was oversubscribed at $210m. Aeglea's shares rose 328% on the announcement. The market was not repricing a portfolio it had barely seen. It was repricing a listing that had just acquired the money to survive.
The shape recurs. Tourmaline Bio reached the market through Talaris Therapeutics with a $75m placement from RA Capital, Vivo Capital, Deep Track Capital and others. Carisma Therapeutics arrived through Sesen Bio on a $30m round that included AbbVie, Wellington Partners and TPG Biotech.
In each case a large part of the target's cash never made the journey. Talaris paid its own shareholders a special dividend of roughly $64.8m before closing, out of the $210m the combined company held. Sesen paid out $75m, more than twice what Carisma raised alongside it, leaving the merged business with $140m and about two years of runway.
So the private biotech buys a listing rather than a balance sheet, and pays for it with money it brought itself. The cash that made the target attractive goes back to the people who were already there.
That dividend is also the list from a moment ago. A special payout to legacy holders, a contingent value right on the old assets, a workforce that does not survive the closing: each is a term the incoming investors want, and each is a fact the commission can read as proof that the target had become a shell. The cleaner the exit for the people leaving, the weaker the regulatory position of the company left behind, which loses a year of access to the shelf registration that ordinary public companies use to raise money quickly.
Who pays for the delay
Read the two halves together and the problem looks less like a shortage of shells than a shortage of boards willing to become one.
Every company sitting below cash without running a process is holding capital the market has already said it cannot use. Some of that money reaches shareholders eventually, through a dividend at the front of a merger or a contingent value right after a sale. The rest funds the delay. The friction is not hypothetical. Investors holding 8% of Sesen Bio objected publicly to its merger terms in January 2023.
How much the delay costs in aggregate is harder to establish, because the evidence sits in individual proxy statements rather than any published series. No one maintains a reconciled quarterly count of below-cash biotechs, and the figures above come from screens that disagree with one another. Anyone claiming to know the size of this problem precisely is guessing.
The outside discipline is thinning too. In April 2026 Ligand Pharmaceuticals agreed to buy XOMA Royalty for $739m, at $39.00 a share plus a right tied to XOMA's litigation against Johnson & Johnson's Janssen unit. One of the two most visible buyers of stranded biotech balance sheets has now been bought itself.
The test case
Fulcrum Therapeutics is the version playing out in the open. At the end of May 2026 the company abandoned pociredir, its sickle-cell candidate, after the Food and Drug Administration took a hard line on malignancy risks read across from Ipsen's withdrawn drug Tazverik. The shares fell 52% in a session. The board approved a restructuring that cut the workforce by 85%, from 57 people to nine, and hired Leerink Partners to review strategic alternatives without naming a deadline.
Fulcrum held $333.3m at the end of March 2026, enough on its own projections to fund operations into 2029. That runway was calculated for a pipeline that no longer exists. Three futures remain: return the money, sell to a bidder that wants the money, or merge with a private business that arrives carrying enough of its own to re-qualify the listing.
The industry calls this a shell shortage. That gets the noun wrong. There is no shortage of failed biotechs, and none of cash inside them. What runs short is the moment a board agrees its company is finished.