Claudin18.2 continues to fan the dealmaking flames

Claudin18.2 emerged as a cancer mechanism to watch last year, and Leap Therapeutics is betting on this space getting hotter. The biotech is asking its shareholders to accept huge dilution in an all-stock acquisition of Flame Biosciences, which owns two very early-stage assets against this target. Should the transaction complete, Flame shareholders will end up owning 58% of the combined entity, or 47% on a fully diluted basis. Flame licensed its Claudin18.2 assets from Novarock last year so new Leap will owe milestone payments should progress be made. And while two unwanted Flame assets will be put up for sale, 80% of any after-tax proceeds would flow back to Flame’s investors. Combined cash of $115m will last until mid-2025, and Leap's management will take the top seats but this all feels like thin icing on a meagre cake for Leap's investors. Still, having endured four years of share price stagnation perhaps they will decide that this deal delivers hope of better returns than DKN-01, which has failed to set the stock alight despite years of development. Much now depends on the progress of more advanced Claudin18.2 projects: over to Astellas, which will present detailed phase 3 data later this year.