Form 4: OrbiMed Exits Turnstone Biologics Stake

OrbiMed Advisors and OrbiMed Capital GP VI LLC disposed of their entire 3,099,265 shares of Turnstone Biologics common stock following a cash tender offer by XOMA Royalty Corporation.

Summary

• OrbiMed Advisors LLC and OrbiMed Capital GP VI LLC, significant shareholders and directors of Turnstone Biologics Corp. (TSBX), reported the disposition of 3,099,265 shares of common stock.
• The disposition occurred on August 8, 2025, as a result of an Agreement and Plan of Merger dated June 26, 2025.
• XOMA Royalty Corporation completed a cash tender offer for all outstanding shares of Turnstone Biologics.
• Shareholders received $0.34 per share in cash and one non-transferable contractual contingent value right (CVR) per share.
• Following this transaction, the reporting persons' direct beneficial ownership of these specific shares is zero.

Sentiment

Score: 6

Explanation: Neutral to slightly positive for the reporting entity. While the company is being acquired at a specific price, the reporting entity successfully exited its investment. The CVR offers potential future value, but the low cash price and non-transferability of the CVR introduce some uncertainty.

Positives

• The transaction represents a successful exit for OrbiMed from its investment in Turnstone Biologics through a tender offer.
• The cash component of $0.34 per share provides immediate liquidity to shareholders.
• The inclusion of a Contingent Value Right (CVR) offers potential future upside based on specific milestones or events.

Negatives

• The cash consideration of $0.34 per share might be considered low depending on the company's prior valuation or investor expectations.
• The CVR is non-transferable, limiting liquidity for this portion of the consideration.
• The disposition indicates the end of Turnstone Biologics as an independent publicly traded entity, which may disappoint long-term investors who anticipated continued growth.

Risks

• The value of the non-transferable contractual contingent value right (CVR) is uncertain and dependent 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

Management Comments

• Each of the Reporting Persons disclaims beneficial ownership of the securities reported herein for purposes of Rule 16a-1(a) under the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), except to the extent of his or its pecuniary interest therein, if any.
• This report shall not be deemed an admission that any of the Reporting Persons or Gupta is a beneficial owner of such securities for the purpose of Section 16 of the Exchange Act, or for any other purpose.

Industry Context

This transaction reflects ongoing consolidation within the biotechnology and biopharmaceutical sectors, where smaller companies like Turnstone Biologics may be acquired by larger entities like XOMA Royalty Corporation, often for their pipeline assets or intellectual property, providing an exit for early investors.

Comparison to Industry Standards

• The acquisition price of $0.34 per share plus a CVR is specific to Turnstone Biologics' valuation and pipeline. Without detailed financial performance or pipeline data, direct comparisons to other biotech acquisitions (e.g., recent acquisitions of clinical-stage biotechs like Mirati Therapeutics by Bristol Myers Squibb or Seagen by Pfizer) are not possible from this filing alone.
• The structure of a cash payment combined with a CVR is a common mechanism in biotech mergers, allowing acquirers to manage risk while offering sellers potential upside if specific clinical or regulatory milestones are met.

Stakeholder Impact

• Shareholders: Received $0.34 per share in cash and one non-transferable CVR per share, marking the end of their investment in Turnstone Biologics as an independent public company.
• Employees: Not directly addressed in this filing, but mergers often lead to organizational restructuring and potential job impacts.
• Management: The existing management team of Turnstone Biologics will likely transition or be replaced as part of the acquisition by XOMA Royalty Corporation.

Key Dates

Recommendation

The filing details the disposition of all shares by a major investor due to a completed cash tender offer and merger. For existing shareholders, the appropriate action is to tender their shares as per the merger agreement. For new investors, the company is no longer an independent publicly traded entity, making a 'buy' or 'hold' recommendation irrelevant for its common stock.

Keywords

Turnstone Biologics, TSBX, OrbiMed Advisors, XOMA Royalty Corporation, Merger, Tender Offer, SEC Form 4, Beneficial Ownership, Contingent Value Right, CVR, Biologics, Investment Exit