Direct Biologics Poised for Public Debut Through SPAC Merger: ExoFlo Advances to Phase 3 COVID-19 Trial

Direct Biologics has secured a definitive merger agreement with Good Works II Acquisition Corp., setting the stage for the biotech company’s public listing in the first half of 2023. Once the transaction closes, the combined entity will trade on Nasdaq Capital Market under the Direct Biologics stock banner, marking a significant milestone for the late-stage regenerative medicine developer.

The Deal Structure: $75 Million Minimum and $100 Million Raise

The transaction hinges on a minimum cash condition of $75.0 million net cash at closing. To support this, Direct Biologics is simultaneously executing a private placement targeting up to $100 million in fresh capital. IB Investments I LLC, affiliated with the placement agent and Good Works II sponsor, has already committed $5.0 million to the private placement. Combined with the existing cash reserves in the Good Works II trust account, the merged company will have substantial resources to fuel clinical development and commercialization efforts.

Closing is anticipated in the first half of 2023, with Good Works II shareholders having already voted to extend the business combination deadline to April 14, 2023, during an October 2022 meeting.

ExoFlo: Breaking New Ground in Regenerative Medicine

At the heart of Direct Biologics’ commercial thesis is ExoFlo, a pioneering therapeutic candidate leveraging the company’s proprietary extracellular vesicle (EV) technology platform. The drug is engineered from bone marrow-derived mesenchymal stem cells (bmMSC), designed to produce a new class of cell-free therapeutics that harness anti-inflammatory and regenerative properties.

ExoFlo is currently advancing through a Phase 3 clinical trial for treating moderate-to-severe acute respiratory distress syndrome (ARDS) in hospitalized adults with severe-to-critical COVID-19, designated the EXTINGuish COVID-19 trial. This multicenter, randomized, double-blinded, placebo-controlled study will enroll up to 610 patients, with primary efficacy endpoints measuring all-cause mortality at Day 60.

FDA Recognition and Clinical Acceleration

Direct Biologics achieved a significant regulatory milestone when ExoFlo received Regenerative Medicine Advanced Therapy (RMAT) designation from the U.S. Food and Drug Administration. This special designation is specifically designed to accelerate the development and streamline the review pathway for promising regenerative medical products targeting serious, life-threatening diseases with preliminary clinical evidence of efficacy.

ExoFlo holds the distinction of being the first extracellular vesicle drug candidate to secure RMAT status and proceed to Phase 3 trials. The trial’s interim efficacy analysis at 50% enrollment creates a potential pathway to file a Biologics License Application (BLA) or request Emergency Use Authorization if statistical significance is demonstrated.

Strategic Rationale and Pipeline Expansion

Mark Adams, co-founder and CEO of Direct Biologics, emphasized the opportunity the public listing creates: “A public platform enhances our ability to leverage our promising EV platform technology to develop cell-free therapeutic candidates.” The company intends to initiate several additional clinical trials within the next six months, exploring ExoFlo’s potential across multiple indications involving inflammation and tissue repair beyond the current COVID-19 focus.

Cary Grossman, Chief Executive Officer of Good Works II, highlighted the strategic fit: “Direct Biologics has all of the qualities we sought—innovative technology, late-stage clinical validation that reduces shareholder risk, and experienced management committed to advancing the product to market.”

Capital Deployment and Path Forward

Upon transaction close, the combined company will deploy capital from the private placement and Good Works II trust account toward clinical trial funding and working capital for ExoFlo commercialization, contingent on regulatory approval. Direct Biologics maintains operational and R&D infrastructure across Austin (headquarters), University of California Davis (Center for Novel Therapeutics), and San Antonio (operations and fulfillment), positioning it for scaled manufacturing and distribution.

The company’s cGMP manufacturing capabilities underscore its readiness for potential commercialization, while the expanded clinical program signals confidence in the underlying EV platform’s versatility across indications.

Advisors and Transaction Support

Raymond James & Associates is serving as financial advisor to Direct Biologics. IB Capital LLC acts as placement agent for the private placement, with affiliates providing additional transactional support. Legal counsel includes ArentFox Schiff LLP (Good Works II), Goodwin Procter LLP (Direct Biologics), and Ellenoff Grossman & Schole LLP (IBC).

The proposed transaction will be documented in a Form 8-K filing with the U.S. Securities and Exchange Commission, with additional disclosure through a registration statement on Form S-4 to be filed in advance of shareholder approval.

What This Means for Biotech Investors

This SPAC merger represents a notable inflection point for regenerative medicine financing, particularly for companies advancing cell-free therapeutic platforms. Direct Biologics stock will gain liquidity and trading visibility on Nasdaq, while investors gain exposure to a biotech company with clinical-stage validation, regulatory recognition via RMAT designation, and a defined pathway through Phase 3 for a product addressing a significant unmet medical need.

The transaction underscores continued institutional interest in late-stage biotech via SPAC mergers, especially for companies demonstrating clinical progress and clear regulatory pathways.