NewLink Genetics Corp. in Ames announced it will merge with Lumos Pharma Inc., an Austin, Texas-based biopharmaceutical company focused on development and commercialization of therapeutics for rare diseases. 

Under the terms of the merger agreement, Lumos Pharma will become a wholly-owned subsidiary of NewLink, and NewLink will be renamed Lumos Pharma Inc., and will trade on Nasdaq under the symbol “LUMO.” 

Ahead of the proposed merger, NewLink has commenced a restructuring plan aimed at reducing the company’s operating expenses. As part of that plan, the company will reduce its workforce by 28 employees, or approximately 60%, including several members of management. 

Additionally, NewLink’s co-founder, Dr. Nicholas Vahanian, has retired from his position as president of the company and resigned from its board, both effective Sept. 27. Vahanian co-founded NewLink Genetics in 1999 and has been president since 2009 and on the board since 2015. 

The combined company is expected to have offices in Austin and Ames. The boards of both companies have approved the transaction, which also has the approval of major stockholders of Lumos Pharma and the largest stockholder of NewLink, the companies said in a release. The transaction is expected to close in the first quarter of 2020. 

Following the merger, Richard Hawkins, current CEO of Lumos Pharma, is expected to become CEO of the combined company. 

“We believe this combined entity offers us a new, strategic position in the market and has the potential to create significant value to patients and our stockholders alike,” said Dr. Eugene Kennedy, chief medical officer of NewLink. “Rick Hawkins and the other members of the Lumos senior management team bring longstanding experience in rare disease drug development and corporate management, which align ideally with our new strategic focus.”

The proposed merger will create a biopharmaceutical company focused initially on the development of Lumos Pharma’s lead candidate, LUM-201 (ibutamoren), a potential oral therapy for pediatric growth hormone deficiency (PGHD) and other rare endocrine disorders. 

The merger combines the Lumos management team’s deep experience in rare diseases and endocrinology with NewLink’s expertise in drug development and its solid financial position, Hawkins said. 

“As we advance LUM-201 for PGHD through later stages of clinical development, we believe there is an established regulatory path to approval and the opportunity for LUM-201 to become the world’s first oral therapeutic for pediatric growth hormone deficiency,” he said in a release.