Foresite returns to the SPAC well, as investors wonder how long the run can last
Six months after launching his first biotech SPAC, Foresite’s Jim Tananbaum has started a second. On Tuesday, the longtime life science investor filed to raise $100 million by selling 10 million shares of the blank check company FS development II.
It’s a quick return to Wall Street for Foresite, although other firms have moved quicker. Perceptive Advisors raised a $130 million SPAC in June and were back before the end of July to raise another $125 million. By that point, the firm was evidently nearing a deal for the June SPAC, which would announce a half-billion-dollar merger with Cerevel Therapeutics on July 30.
Tananbaum similarly managed to find a quick home for his first SPAC, merging with the genetics-driven eye disease company Gemini Therapeutics in a $216 million deal in October. Bruce Booth, a partner at Atlas Venture, which helped launch Gemini, praised the deal at the time as the archetype for a good SPAC target: A company that hasn’t yet raised a crossover round but already has an established pipeline that will generate clinical data.
The new S-1 offers few details on Tananbaum’s potential targets outside of what’s become boilerplate language for life sciences SPACs. They’ll have two years to find a merger partner.
The new Foresite offering was one of two SPACs to file this week, joining the bluntly named Biotech Acquisition Corp. It was founded by Michael Shleifer, co-founder of SPRIM, which invests in and provides services for CRO, health tech and other life sciences and healthcare companies. Accordingly, depending on how you define “biotech,” the SPAC’s title is a bit of a misnomer: They will also be looking at health tech and medical device companies for mergers.
Shleifer will look to raise even more than Foresite, filing for a $230 million offer.
Both firms, though, are filing just as analysts begin to question how long the SPAC run can last. On Twitter, private investor Brad Loncar noted SPACs can be lucrative for VCs, costing them just a few million dollars to bring public a company worth several hundreds of millions of dollars.
Still, he wondered, whether the number of SPACs was outpacing the number of viable target companies.
One reason I think this market eventually fizzles out if not outright collapses is with all the SPACs happening, competition for targets increases and returns may rationalize or inverse. When the fast money returns go, so will the investors supporting them. I'm very skeptical.
— Brad Loncar (@bradloncar) January 26, 2021