Nivalis Therapeutics Inc (NASDAQ:NVLS) is one of the first spectacular failure stories of 2017. The company announced data from its lead cystic fibrosis trial end November, and the data did not read well. As a result, management has had approved, and is currently putting into force, a restructuring effort, and the company looks like it is set to come to an end, at least in its current iteration. So, what happened, what’s going on right now, and what’s next for the ticker?

Let’s take a look.

So, before looking at what’s to come, let’s take a look at what has happened. As mentioned, Nivalis was developing (and technically, still is developing) a cystic fibrosis treatment called cavosonstat. The drug’s primary mechanism of action is to inhibit what’s called the S-nitrosoglutathione reductase (GSNOR) enzyme and, in doing so, stabilize cystic fibrosis transmembrane regulator (CFTR) protein activity. Data from some early-stage trials looked pretty promising, and many expected the drug to pretty much breeze through its mid-stage phase 2 study and move into a pivotal at some point during the second half of this year. Unfortunately, as things turned out, that didn’t happen. There were a couple of endpoints that the drug needed to hit when compared to placebo as part of trial, in order to be a success. The first, a benefit in absolute change in percent predicted FEV1. FEV1 is an industry standard severity index used to gauge the efficacy of a cystic fibrosis treatment, and is basically a lung capacity study. Patients breathe heavily into a measurement tool and the reading measures how much of their lungs’ vital capacity they are are able to expire in the first second of forced expiration. The second endpoint was a reduction in what is called sweat chloride at 12 weeks. In patients with cystic fibrosis, chloride channels are defective, and so sufferers generally tend to excrete more chloride in their sweat than non-sufferers. As such, if a treatment is effective, it should reduce the amount of chloride measurable in a patient’s sweat.

Unfortunately for Nivalis and its shareholders, cavosonstat failed to show any statistically significant improvement in either of these categories when compared to placebo in the phase II study.

So what has happened since?

As we’ve already mentioned, the company has since announced a restructuring, and it is a pretty severe move. Twenty-five out of the company’s thirty full-time employees have been axed, and the clinical program is pretty much wound down entirely. The axing includes the CEO and the CMO, and reportedly, is an exercise in cash conservation. The company currently projects that it will have approximately $45-$47 million in net cash post-restructure completion.

So what is next?

We have seen this sort of thing happen quite a few times before. A biotechnology company fails to progress with its lead asset, and its legacy pipeline doesn’t warrant further investigation. It shutters its operations, and announces a strategic restructuring. What the word strategic here means, is that the company is looking to sell itself. The obvious question is, how can a company with a failed pipeline and virtually no employees hope to sell itself?

Well, the company doesn’t have a development stage asset anymore, but it does have its public market ticker, and that’s an asset in its own right. The IPO market has been pretty weak over the last 12 months, and a number of companies have sought alternative access to public market capital. One very commonly used example of this alternative access, is to acquire what is essentially a nonoperational company that already has a NASDAQ traded ticker, and reverse merge into this ticker. For Nivalis, this seems as though it is going to be most likely path forward. Shareholders will pick up a capital injection as payment for the ticker, and likely a portion of the newly public company, and the buyer will rename (and perhaps even reticker) Nivalis to suit its own branding.

So that is how things stand at the moment. The company expects to complete the trial that has already failed (nothing more than a formality) and then dress itself or for acquisition.  As such, we are looking for an announcement to this end near term, with expectations of something hitting press before the end of second quarter this year.