Our Take
RallyBio's second crack at going public via reverse merger signals persistent difficulty raising capital on traditional terms, not a narrative of strategic optionality.
Why it matters
Reverse mergers have become a visible exit path for biotech companies unable to secure conventional IPO funding in a tightened capital market. Tracking which companies resort to this route and why offers insight into real financing constraints versus headline risk appetite.
Do this week
Biotech investors: cross-reference RallyBio's pipeline clinical status against Candid's acquisition terms by UCB to understand what valuation assumptions shifted between the first failed deal and this second attempt.
RallyBio targets Avenzo in second reverse merger attempt
RallyBio, a rare disease-focused biotech company, announced plans to merge with Avenzo in a reverse merger transaction. This marks the company's second public attempt to go public via this structure. The first merger agreement, announced with Candid Therapeutics, an immune drug developer, unraveled when Candid was acquired by UCB Pharma instead.
The collapse of the Candid deal left RallyBio without a clear path to public markets through that vehicle. Rather than pivot to a traditional IPO or remain private, the company has moved to pursue the same merger strategy with a different partner.
Reverse mergers reflect real funding pressure
Biotech companies with clinical-stage assets have faced substantially tighter access to IPO markets since 2021. When traditional routes close, some turn to reverse mergers, which pair a private operating company with a publicly traded shell or SPAC-equivalent to achieve public status with less market scrutiny and lower underwriting costs than a conventional IPO.
The fact that RallyBio is attempting this twice, after the first counterparty was acquired away, suggests either that traditional IPO windows remain closed for the company's risk profile or that management views reverse merger terms as commercially preferable to waiting. Either way, the pattern is a signal of capital market conditions, not opportunity.
What investors should track
Compare RallyBio's pipeline stage and clinical data readouts between the announcement of the Candid merger and this Avenzo transaction. If the company's assets have advanced materially (new Phase 2 data, regulatory feedback), that explains the second attempt; the first deal may have been timed too early. If the pipeline status is unchanged, the shift suggests either valuation pressure or a change in financing strategy driven by external conditions, not internal progress.
For participants in biotech M&A, watch whether the Avenzo deal closes and on what terms. A successful reverse merger validates the strategy for other rare disease companies in similar positions. A second failure would signal that the underlying issue is RallyBio-specific, not market-wide.