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Pathos AI to Acquire Rain Oncology

NEW YORK – Rain Oncology, a firm developing precision cancer medicines, on Wednesday said it will be acquired by Pathos AI for $1.16 per share.

The deal, the total value of which has not been disclosed, is expected to close in January 2024. Privately held Pathos AI, a company focused on leveraging machine learning and real-world data in drug development, will make a cash tender offer for all shares of Rain.

In October, Rain had received an unsolicited bid from Tang Capital on behalf of shell company Concentra Biosciences to acquire the firm for $1.25 per share, plus a contingent value right representing the right to receive 80 percent of the net proceeds payable from any license or disposition of the company's programs. But the firm's board of directors has apparently rejected that offer in favor of a deal with Pathos.

According to Rain, the upfront cash consideration represents a 17 percent premium over its Oct. 13 stock price, the last day of trading before Tang's bid. Rain’s shares closed at $1.18 on the Nasdaq yesterday before the Pathos AI agreement was announced.

Under the deal with Pathos AI, Rain is also eligible for non-tradeable contingent value right (CVR) payments, under which it may receive additional cash payments of up to $.17 per share. Rain can receive a cash CVR payment of $5.0 million, if it incurs expenses under pending or future litigation involving its directors or employees; this amount will be adjusted based on any shortfall or excess in the target level of net cash Rain has upon closing of the merger.

Additionally, Rain is eligible for a development CVR payment of $1.0 million if it doses the first patient in a clinical study of its MDM2 inhibitor milademetan within five years of the merger's closing. If Rain licenses or disposes milademetan within two years of the merger's closing, it is eligible for 80 percent of the net proceeds.

The closing of the tender offer is subject to certain conditions, including a stipulation that Rain must have at least $49.6 million cash and cash equivalents, net certain liabilities upon closing.

Leerink is Rain's exclusive financial adviser, and Gibson, Dunn & Crutcher is its legal counsel in the merger. Goodwin Procter is Pathos AI's legal counsel.

Newark, California-based Rain, formerly Rain Therapeutics, is studying milademetan in the MANTRA-2 Phase II basket trial in MDM2-amplified solid tumors and in a Phase III trial in well-differentiated and de-differentiated liposarcoma. The company is also evaluating milademetan with Roche's checkpoint inhibitor Tecentriq (atezolizumab) in advanced solid tumors with CDKN2A loss and wild-type p53. In November 2022, the firm raised about $50 million in a stock offering to support advancement of its drug pipeline.