Xoma Royalty Acquires Turnstone Biologics in $8M Deal, Marking End of Once-Promising Biotech

Turnstone's Fall from Grace

Turnstone Biologics, a once-promising biotech company that had secured partnerships with pharmaceutical giants AbbVie and Takeda, has reached its final chapter. In a surprising turn of events, Xoma Royalty has announced its acquisition of Turnstone for a mere $7.9 million, or $0.34 per share in cash. This low-profile exit comes as a stark contrast to Turnstone's previous success in attracting hundreds of millions of dollars from investors and partners.

The San Diego-based company's downfall began earlier this year when manufacturing costs forced the termination of its last remaining clinical program. This decision triggered a round of layoffs and initiated a search for strategic alternatives. Transferred off the main Nasdaq exchange and running low on cash, Turnstone found itself in a precarious position, lacking the resources typically sought by potential buyers in the biotech industry.

Deal Structure and Assets

While the initial cash offer appears modest, Xoma has included a contingent value right (CVR) in the deal, potentially offering Turnstone's shareholders additional future compensation. However, specific details regarding the CVR were not disclosed in the companies' June 27 press release.

In exchange for its investment, Xoma will gain access to Turnstone's remaining cash reserves, which stood at $21.8 million as of March 31, 2025. Additionally, Xoma will acquire Turnstone's tumor infiltrating lymphocyte pipeline and associated technologies. It's worth noting that Turnstone's lead candidate was in a phase 1 solid tumor trial before development was halted.

Historical Context and Partnership Dissolutions

Turnstone's journey in the biotech industry was once marked by high-profile collaborations. In 2017, the company partnered with AbbVie, followed by a deal with Takeda in 2019. However, both of these partnerships have since dissolved. Turnstone's 2024 annual report explicitly stated that no additional collaboration revenue would be forthcoming from the Takeda agreement due to its termination. Notably, AbbVie, which ended its collaboration with Turnstone in 2019, was not even mentioned in the annual report.

This acquisition aligns with Xoma's business model, which focuses on acquiring rights to royalties and milestones. The company typically offers biotechs upfront cash in exchange for longer-term revenue streams, a strategy that may provide some value to Turnstone's remaining assets and intellectual property.