Tocagen Inc. entered a deal to merge with privately held biopharmaceutical company Forte Biosciences Inc. in an all-stock transaction.

The combined entity is expected to operate under the name Forte Biosciences and will trade on the Nasdaq Capital Market under the FBRX ticker symbol.

Under the agreement, Tocagen equity holders immediately prior to the merger will own about 25.5% of the combined company, while Forte equity holders will own about 74.5% of the merged company on a fully diluted basis going by the treasury stock method. The deal has been approved by the board of directors of both companies.

The resulting company will focus on Forte's therapies for inflammatory skin diseases. Forte's lead asset is FB-401, a potential topical therapy for skin diseases such as atopic dermatitis. The therapy has shown significant efficacy in a phase 1/2a trial in adults and children.

Tocagen develops therapies designed to activate a patient's immune system against their cancer. In October 2019, the company decided to reduce its workforce by 65% to focus resources on the clinical development of its brain cancer therapies.

The merger is expected to close in the second quarter of 2020. The deal is subject to approval from stockholders of both companies, among other customary closing conditions.

The combined company will be led by Paul Wagner, Forte's current president and CEO. The company will be headquartered in Torrance, Calif.

Ladenburg Thalmann & Co. Inc. is acting as financial adviser to San Diego-based Tocagen for the deal, while Cooley LLP is the company's legal counsel. Wilson Sonsini Goodrich & Rosati PC is serving as legal counsel to Forte.