Redx Pharma, a drug discovery and development company, is to merge with US drug research company Jounce Therapeutics.

Cheshire-based Redx is a clinical-stage biotechnology company focused on the discovery and development of novel, small molecule, targeted therapeutics for the treatment of cancer and fibrotic diseases and the emerging area of cancer-associated fibrosis.

Jounce is a clinical-stage immunotherapy company, dedicated to transforming the treatment of cancer by developing therapies that enable the immune system to attack tumours and provide long-lasting benefits to patients through a biomarker approach.

The combined group’s highest priority will be the development of RXC007, a next-generation selective ROCK2 inhibitor, which is currently being assessed.

Lisa Anson, CEO of Redx Pharma, said: “By combining Redx’s proven track record in small molecule drug discovery and development with Jounce’s expertise in biologics and immunotherapy, we will establish a world-class biotech company with a robust pipeline, aimed at developing therapeutics for cancer and fibrotic disease.

“RXC007, our next-generation ROCK2 inhibitor, will lead the clinical pipeline, and we will now further investigate opportunities for this asset in cancer-associated fibrosis and other interstitial lung diseases.

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“While the majority of the combined group’s operations, and its headquarters, will be at Alderley Park in the UK, we believe that listing solely on Nasdaq is the most efficient way to enable us to access a deep pool of risk capital and engage with specialist global investors to support our future growth.”

Richard Murray, CEO and president of Jounce Therapeutics, said: “I am very proud of the work we have achieved at Jounce and today’s news is testament to the accomplishments of our team’s efforts.

“We are pleased that many of our employees will join the combined group and continue to focus on bringing much-needed alternatives to patients.

“Additionally, we are pleased that Redx will continue to advance certain of our early discovery programs. With a focus on cancer and fibrosis, and a strong scientific basis for discovery and development programs in those areas, we believe that the new company will be well positioned to succeed.”

At the time of the completion, Jounce is expected to have around $155m of cash and cash equivalents, which net of any tail and closing costs results in at least $130m in cash and cash equivalents available to the combined group.

Together with Redx’s expected cash at completion would provide the combined group with cash runway into H2 2025.

Based on Redx’s fully diluted market capitalisation of £244m ($294m) and Jounce’s expected cash and cash equivalents at the time of completion, this implies a market value for the combined group of $425m.

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After completion of the transaction, around 47 Jounce employees will be retained by the combined group at a research and development base in Massachusetts, USA and will bring complementary expertise in biologics and immuno-oncology.