On October 6, Caribou Biosciences announced the termination of further development for two allogeneic CAR-T therapies, large-scale layoffs, and the initiation of a strategic review. This star company, co-founded by CRISPR pioneer Jennifer Doudna, was once one of the most closely watched targets in the gene editing track.

Pipeline halted, employees gone, stock plummeting. Generally speaking, this is the standard script for a biotech heading toward its end.

But now, the story may have another ending.

Leerink Partners analysts noted that Caribou's outcome is either acquisition or a reverse merger. The company's original R&D business may have lost its appeal, but the cash on its books and its listing status could still become the starting point for another deal.

This is not an opportunity unique to Caribou.

According to statistics from life sciences consulting firm JB Strategy Partners, as of September, approximately 24 reverse acquisitions involving biotech companies have been announced this year — more than double the 10 in all of 2025.

Li Rui, a partner at Button Capital, told Tongxieyi that what is truly worth watching in this wave is not the reverse mergers themselves, but the growing presence of Chinese innovative drug assets within them.

As a batch of U.S. biotechs' R&D stories reach their end, the listing platforms they leave behind may become new entry points for Chinese innovative drugs to access global capital markets.

Chapter 1: Why Are Shells Valuable Again?

In the U.S., reverse mergers have always been a common route to listing. A traditional IPO generally takes 12–18 months, but a reverse merger typically takes only 3–6 months — faster and cheaper.

Reverse mergers themselves typically do not bring new financing, and the buyer must inherit the shell company's history in its entirety, which may bring many risks that are difficult to fully identify before the transaction. Therefore, reverse mergers have never been the market mainstream.

But in 2026, reverse mergers are becoming a listing path that more and more biotechs are actively considering.

The biotech IPO wave of 2020–2021 left behind a large number of listed companies. FactSet data shows that in those two years, the number of U.S. biotech IPOs reached 51 and 70, respectively. As the market receded, a batch of companies encountered clinical setbacks, pipelines stalled or even lost development value, yet they still retained cash and listing status — becoming ideal "shell" resources.

"They need to find new assets to provide the market and shareholders with new value expectations, otherwise they may continue burning cash and even face delisting risk," Li Rui said.

These companies form the supply base for this round of reverse mergers. For biotechs hoping to enter public markets, these companies offer ready-made listing platforms.

At the same time, traditional IPOs have also experienced a trough. In 2025, the number of U.S. biotech IPOs was at a multi-year low. But since the beginning of this year, U.S. biotech IPOs have seen a recovery. According to Citeline statistics, as of now, 24 biopharmaceutical companies have listed in the U.S. in 2026, roughly twice the number in 2025.

Li Rui judges that the IPO recovery does not mean reverse mergers will cool down. "IPOs and reverse acquisitions don't conflict in the U.S. market — both are basic operations, and it's not a matter of one replacing the other. It's more a question of choice: if a company has built a substantial presence in the U.S. primary market and reached sufficient scale, an IPO is a natural choice; but if a suitable shell happens to be available, a reverse acquisition is also a good option."

Chapter 2: Why Have Chinese Assets Become the Protagonist of the New Story?

What is truly worth watching in this round of reverse mergers is the increasingly dense presence of Chinese innovative drug assets in transactions.

Over the past few years, the mainstream approach for Chinese innovative drugs going global has been to license assets to multinational pharmaceutical companies, or for U.S. dollar funds to establish NewCos that acquire overseas rights to Chinese assets and continue development.

In Li Rui's view, reverse mergers are more like an extension of the NewCo model.

"In the past, when people did NewCo formation, the buyers were mainly overseas U.S. dollar funds using primary market money. Now these listed shell companies are essentially also a buyer: they come with listing status, a clean amount of cash on the books, and often a PIPE consortium investing alongside. They play essentially the same role as the buyer in NewCo formation, except the money has shifted from the primary market to the secondary market."

This change has already appeared in specific transactions.

Serapha Bio announced in June 2026 a reverse merger agreement with Nasdaq-listed Boundless Bio, along with a concurrent $230 million private financing commitment, co-led by RA Capital Management and RTW Investments. Serapha's core asset SERP-01 comes from Chinese gene editing company YolTech Therapeutics and is a base editing therapy targeting AATD.

In July 2026, Hansoh Pharmaceutical announced an exclusive licensing agreement and participation in a strategic investment with Avere, granting Avere exclusive rights to develop, manufacture, and commercialize HS-20118 (AVR-001) globally (excluding mainland China, Hong Kong, Macau, and Taiwan).

This is a cyclic peptide IL-23 receptor antagonist. Hansoh Pharmaceutical is entitled to receive a total of $120 million in upfront payments, up to $2.18 billion in development and sales-related milestone payments, and royalties.

At the same time, Avere and Nasdaq-listed NextCure announced a merger agreement, along with a concurrent $320 million private financing. In August, Avere announced an additional $500 million private financing, bringing the two rounds to a total of $820 million.

For Hansoh, this arrangement allows it to obtain upfront and potential milestone income through licensing, while also sharing in the value created by subsequent asset development through investment and equity holdings. For the merged company, the Chinese asset provides a new R&D pipeline, while the listing platform and accompanying financing provide the funding foundation for subsequent development.

The underlying logic of the two deals is the same: Chinese innovative drug assets provide R&D value, overseas listing platforms provide capital market entry points, and accompanying financing provides funding for subsequent development.

What has changed is not the direction of Chinese innovative drugs going global, but the entities undertaking these assets and the pathways through which capital enters.

Chapter 3: In a Reverse Merger, Who Holds the Initiative?

Transaction control depends on both parties' assessment of the relative value of the asset and the listing platform. If the shell itself is more valuable, the terms may tilt toward the shell company; if the new asset is more attractive, the asset party may have greater control.

"Who holds control depends on how both parties assess the relative value of the asset and the shell: if the shell is valuable and the asset is cheap, the shell calls the shots; conversely, it's a backdoor listing logic. A shell is never a neutral container — it is a party in the transaction," Li Rui said.

In March 2026, Candid Therapeutics originally planned to enter public markets through a merger with Rallybio, with plans to complete approximately $505 million in concurrent financing. Candid focuses on autoimmune and inflammatory diseases, with its core pipeline being T-cell engager (TCE) assets licensed from Chinese companies.

But on May 3, UCB announced the acquisition of Candid for a total transaction value of up to $2.2 billion, including a $2 billion upfront payment and up to $200 million in potential milestone payments. Candid immediately terminated its merger agreement with Rallybio and completed the UCB acquisition in June.

When the asset party is in a dominant position, even if a reverse merger has reached the agreement stage, a high-quality asset may still choose another buyer; conversely, the bargaining power of high-quality shell resources may also rise with changes in supply and demand.

Take I-Mab as an example. In 2024, I-Mab divested its China business, team, and pipeline to Tianjing Biotech, retaining only its Nasdaq listing status. Subsequently, under the leadership of CBC Group, I-Mab (renamed NovaBridge) completed the acquisition of ophthalmic VEGF-A/ANG2 bispecific VIS-101 in 2025 through its subsidiary Visara.

This shows that reverse mergers are not just about private companies borrowing listing qualifications. Listed companies themselves can also become platforms for undertaking new assets, restructuring businesses, and reallocating capital.

Li Rui particularly noted that as demand increases, clean shell resources may gradually become scarce, and the bargaining positions of both parties will also change. The value of a shell is not just listing status, but also book cash, capital structure, and subsequent financing capability.

"Mainstream media keeps portraying overseas large U.S. dollar funds doing NewCos and buying Chinese assets. But if you step back and look at it, this secondary market shell, although not as clean as a SPAC, has real money sitting on its books — typically in the tens of millions to $100 million range — plus concurrent PIPE ammunition, enough to continue loading suitable assets. It is itself a form of buyer. What hasn't changed behind it all is the rising international competitiveness of Chinese assets."

Chapter 4: Listing Is Not the Endpoint

Transaction structures can be designed, and capital market entry points can be chosen, but the development progress and quality of the asset still determine how far this deal can go.

Li Rui summarizes the risks of the asset itself into three dimensions: pricing, quality, and stage. The earlier the asset's development stage, the higher the uncertainty typically; the later the stage, the higher the transaction consideration may be. Regardless of which pathway is used for outbound expansion, these risks do not change.

"Clinical assets are inherently binary — once the data read out, it's either zero or a sharp rise. A reverse acquisition simply transfers this bet from the primary market to the secondary market."

When the asset party looks at the shell, it needs to confirm whether the listing platform is clean and how much of the book cash is actually usable. Pending litigation, warrants, convertible bonds, legacy leases, and severance obligations can all affect the actual value after closing, and these risks do not automatically disappear once the transaction is completed. In addition, the asset party needs to assess whether the transaction terms are reasonable, how equity is allocated, and how the original business is to be handled.

When the shell company and PIPE investors look at the asset, they need to judge whether the pipeline is worth taking on, whether R&D risks can be reasonably priced, and whether subsequent funding is sufficient to support clinical development. Transactions can lock in valuations and financing terms in advance, but cannot predict clinical outcomes, nor guarantee that the transaction will ultimately close.

"Ultimately, what a reverse merger saves is the friction of the issuance process — what it cannot save is the risk of making drugs itself," Li Rui said.

For NewCos, reverse mergers and traditional IPOs are different paths to entering public markets; for Chinese asset parties, what truly needs to be compared is whether different transaction proposals can push the asset to the next value inflection point on reasonable terms.

Li Rui said the path to going global is not either-or — MNC licensing, overseas fund NewCos, and overseas secondary market shell NewCos can all be pursued simultaneously. Ultimately, what is compared is whether transaction terms can be negotiated to the right place.

"Whether the person sitting across the table is an MNC, a U.S. dollar fund, or a secondary market shell, the homework at the negotiating table is the same. What stage has the asset been pushed to, can the data support the asking price, how are equity and cash allocated in the terms. The best endgame is still selling to an MNC, but before reaching the MNC's transaction requirements, you first need to use money from either the primary or secondary market to push the asset to its value inflection point — only by staying at the table do you have a chance to win."

— In Conclusion —

For a biotech, listing is never the endpoint, but the starting point of the next stage of R&D. Capital can help a drug gain more development opportunities, but cannot replace the ultimate answer of clinical trials.

As more and more Chinese assets enter overseas capital markets, what is truly worth observing is not just how they list, but who is willing to continue funding their R&D, and whether the next set of clinical data can keep this transaction going.

References:

1. A booming business on Wall Street would love more biotechs to quietly die; BioPharma Dive

2. Finance Watch: 2026 Biopharma IPO Total Doubles Last Year's Number; Citeline

3. In the hunt for reverse merger targets, Caribou could be prized game; BioPharma Dive

4. Biotech start-ups turn to reverse mergers to fast-track listings; Financial Times