Proteon Therapeutics, which focuses on kidney and vascular diseases, has signed a definitive agreement to merge with rare and speciality disease drugs developer ArTara Therapeutics.

As part of the all-stock transaction, Proteon’s wholly owned subsidiary will combine with ArTara.

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The combined company will advance ArTara’s pipeline, which includes late-stage, de-risked assets targeting rare and speciality diseases.

A consortium of healthcare investors has entered into a stock purchase agreement to invest $42.5m in the merged company, which is set to operate as ArTara Therapeutics.

The funds are intended to support ArTara’s TARA-002 and IV Choline Chloride assets.

TARA-002 is a follow-on biologic of OK-432, which is made of inactivated Group A streptococcus bacteria and approved in Japan for a rare disorder called lymphangiomas and additional speciality indications.

ArTara intends to develop TARA-002 to treat lymphangiomas, with plans to explore other indications in the future.

Meanwhile, IV Choline Chloride is a phospholipid substrate replacement therapy intended for choline-deficient patients having hepatic steatosis and cholestasis caused by dependence on long-term parenteral nutrition.

Both ArTara’s assets have orphan drug designation in the US.

ArTara Therapeutics CEO Jesse Shefferman said: “We are excited about the opportunity for this merger, which will allow ArTara to help fill the void in treatment options for these two rare diseases and potentially address additional significant unmet need in other disease areas.”

Under the terms of the agreement, Proteon stockholders will hold around 10% of the company and the remaining by ArTara security holders and investors.

Approved by the board of directors of the companies, the transaction is subject to customary closing conditions, with expected completion by the end of the year.

The investment from the consortium may be consummated simultaneously with the closing of the deal.