Form 4: Director Sells TSBX Shares in Merger Tender Offer

Turnstone Biologics Director Rishi Gupta disposed of over 3 million shares of common stock as part of a cash tender offer by XOMA Royalty Corporation.

Summary

• Rishi Gupta, a Director of Turnstone Biologics Corp. (TSBX), disposed of 3,099,265 shares of common stock.
• The disposition occurred on August 8, 2025, pursuant to the terms of an Agreement and Plan of Merger.
• This transaction was part of a cash tender offer by XOMA Royalty Corporation ("Purchaser") and its wholly-owned subsidiary XRA 3 Corp. for all outstanding shares of Turnstone Biologics common stock.
• Shareholders received $0.34 per share in cash, subject to tax withholding and without interest, plus one non-transferable contractual contingent value right (CVR) per share, also subject to tax withholding and without interest.
• The shares were held of record by OrbiMed Private Investments VI, LP, and Rishi Gupta disclaims beneficial ownership except to the extent of his pecuniary interest therein.

Sentiment

Score: 6

Explanation: Neutral to slightly positive. The filing itself is a routine disclosure of a transaction resulting from a merger. For the reporting person, it's a disposition, but it's part of a liquidity event (merger). For the company, it signifies the completion of an acquisition, which can be positive for shareholders receiving consideration, but also means the company as a standalone entity is ceasing to exist. The CVR adds a speculative element.

Positives

• The transaction represents the successful completion of a tender offer, providing liquidity to shareholders.
• Shareholders received a cash payment of $0.34 per share, along with a contingent value right, offering potential future upside based on specific milestones.

Negatives

• The disposition of shares indicates the reporting person no longer holds direct beneficial ownership of these shares in Turnstone Biologics, as the company is being acquired.
• The cash price of $0.34 per share may be considered low depending on the company's prior trading history or intrinsic value.

Risks

• The value of the contingent value right (CVR) is uncertain and depends on future events or milestones, which may not be achieved.
• Shareholders are subject to any applicable tax withholding on the cash and CVR payments.

Future Outlook

NA

Industry Context

This transaction reflects ongoing consolidation within the biotechnology or biopharmaceutical sector, where larger entities acquire smaller companies, often through tender offers, to gain access to specific assets, pipelines, or technologies. The use of Contingent Value Rights (CVRs) is a common mechanism in biotech mergers to bridge valuation gaps and share future risks/rewards related to clinical milestones or regulatory approvals.

Comparison to Industry Standards

• The use of a cash tender offer combined with a Contingent Value Right (CVR) is a standard acquisition structure in the biotechnology industry, particularly for companies with pipeline assets that have future value potential but are not yet fully realized.
• Comparable transactions often involve CVRs tied to specific clinical trial phases (e.g., Phase 2, Phase 3 completion), regulatory approvals (e.g., FDA approval), or commercialization milestones. For example, the acquisition of Synageva BioPharma by Alexion Pharmaceuticals included CVRs tied to the approval of Kanuma.
• The specific cash price of $0.34 per share would need to be compared against Turnstone Biologics' recent trading history and analyst price targets prior to the merger announcement to assess its premium or discount relative to market expectations.

Related Party Transactions

• The shares were held by OrbiMed Private Investments VI, LP, an entity related to OrbiMed Advisors, where the reporting person (Rishi Gupta) is an employee. This indicates an indirect beneficial ownership through a related investment fund.

Stakeholder Impact

• Shareholders: Received cash and CVRs for their shares, providing liquidity and potential future upside.
• Employees: The merger may lead to changes in employment status or structure, though not explicitly stated in this filing.
• Company (Turnstone Biologics): Will cease to be an independent publicly traded entity, becoming a subsidiary of XOMA Royalty Corporation.

Next Steps

• The contingent value rights (CVRs) will be subject to future events or milestones that determine their payout, if any.
• The merger process will conclude, leading to Turnstone Biologics Corp. becoming a subsidiary of XOMA Royalty Corporation.

Key Dates

Recommendation

The company's common stock is being acquired via a tender offer, meaning there is no ongoing trading opportunity for the common shares. Existing shareholders have received cash and contingent value rights (CVRs). The recommendation to "hold" pertains to the CVRs, as their value is dependent on future milestones. For new investors, there is no direct investment in Turnstone Biologics common stock.

Keywords

Turnstone Biologics, TSBX, Rishi Gupta, SEC Form 4, Tender Offer, Merger, XOMA Royalty Corporation, Contingent Value Right, CVR, Share Disposition, Corporate Acquisition, Biologics