David Berry, Valo Health CEO (Flagship Pioneering)

In a sur­prise move, Flag­ship's Va­lo Health and Khosla Ven­tures SPAC call off merg­er

By most ac­counts, the biotech sec­tor has boomed through­out the Covid-19 pan­dem­ic, par­tic­u­lar­ly for com­pa­nies look­ing to go pub­lic through a tra­di­tion­al IPO or the ever-more-pop­u­lar SPAC route. But as one Flag­ship biotech found out, some of the lus­ter might be wear­ing off.

Va­lo Health and its SPAC part­ner, the first of Khosla Ven­tures’ three blank check com­pa­nies, called off their merg­er late Mon­day in a state­ment cit­ing on­ly the vague “cur­rent mar­ket con­di­tions” as the rea­son. The ter­mi­na­tion came just one day be­fore a share­hold­er meet­ing where a vote on the merg­er was ex­pect­ed.

Ac­cord­ing to pre­pared state­ments from both sides, the de­ci­sion was made am­i­ca­bly. Khosla man­ag­ing di­rec­tor Samir Kaul de­scribed Va­lo as a “strong com­pa­ny” and wished it fu­ture suc­cess, while Va­lo CEO David Berry not­ed the com­pa­ny re­mains in an “op­ti­mal po­si­tion of strength.”

The Khosla SPAC was the first of three launched by promi­nent biotech in­vestor Vin­od Khosla, who set up the trio of blank check com­pa­nies in Feb­ru­ary. Trad­ing un­der the tick­er $KVSA, it will con­tin­ue to seek out busi­ness part­ners be­fore the two-year dead­line ex­pires.

Com­bined, the SPACs had raised more than $1.2 bil­lion, with the ve­hi­cles con­tain­ing trusts of rough­ly $300 mil­lion, $400 mil­lion and $500 mil­lion, re­spec­tive­ly. The sec­ond SPAC merged with so­cial net­work­ing ser­vice Nextdoor, de­but­ing on the New York Stock Ex­change last week, while the third blank check com­pa­ny is yet to find a com­pan­ion.

Va­lo’s merg­er had been ex­pect­ed with the $300 mil­lion out­fit, though by the time the sides an­nounced the deal in June the trust had grown to $333 mil­lion. Ex­pect­ed to close this quar­ter, the agree­ment would have seen Va­lo net an ad­di­tion­al PIPE fi­nanc­ing of more than $200 mil­lion, fol­low­ing new in­vest­ments last week, and a $2.8 bil­lion val­u­a­tion.

Mon­day’s move blunts the biotech’s mo­men­tum fol­low­ing what had been a quick rise. Flag­ship un­veiled the com­pa­ny back in Sep­tem­ber 2020, mak­ing a bet that mar­ry­ing ar­ti­fi­cial in­tel­li­gence with cloud com­put­ing — in a bid to an­a­lyze mas­sive amounts of hu­man da­ta — would prove the next fron­tier in drug de­vel­op­ment.

Berry told End­points News in a pre­vi­ous in­ter­view he orig­i­nal­ly set out to pur­sue a tra­di­tion­al IPO for Va­lo, but changed course due to Khosla’s rep­u­ta­tion and his 20-year pro­fes­sion­al re­la­tion­ship with Kaul. In an email Wednes­day morn­ing, Va­lo spokesper­son Jen­nifer Han­ley told End­points Va­lo now plans to go af­ter an IPO, but there’s no word yet on tim­ing.

The com­pa­ny had pre­vi­ous­ly se­cured a $100 mil­lion Se­ries A and a $300 mil­lion ex­tend­ed Se­ries B pri­or to June’s SPAC an­nounce­ment.

SPACs had proven ex­treme­ly pop­u­lar in­vest­ment tools in late 2020 and ear­ly 2021, with the mar­ket rais­ing more than $300 bil­lion in the first quar­ter across all sec­tors. Fol­low­ing a spring slow­down af­ter the SEC hint­ed it may crack down, ac­tiv­i­ty ramped back up over the sum­mer.

This ar­ti­cle has been up­dat­ed to in­clude com­ment from Va­lo spokesper­son Jen­nifer Han­ley. 

Has the mo­ment fi­nal­ly ar­rived for val­ue-based health­care?

RBC Capital Markets’ Healthcare Technology Analyst, Sean Dodge, spotlights a new breed of tech-enabled providers who are rapidly transforming the way clinicians deliver healthcare, and explores the key question: can this accelerating revolution overturn the US healthcare system?

Key points

Tech-enabled healthcare providers are poised to help the US transition to value, not volume, as the basis for reward.
The move to value-based care has policy momentum, but is risky and complex for clinicians.
Outsourced tech specialists are emerging to provide the required expertise, while healthcare and tech are also converging through M&A.
Value-based care remains in its early stages, but the transition is accelerating and represents a huge addressable market.

Lat­est on ul­tra-rare dis­ease ap­proval; Pos­i­tive, if mixed, signs for Bio­gen's ALS drug; Clay Sie­gall finds a new job; and more

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FDA spells out how can­cer drug de­vel­op­ers can use one tri­al for both ac­cel­er­at­ed and full ap­provals

The FDA’s Oncology Center of Excellence has been a bright spot within the agency in terms of speeding new treatments to patients. That flexibility was on full display this morning as FDA released new draft guidance spelling out exactly how oncology drug developers can fulfill both the accelerated and full approval’s requirements with just a single randomized controlled trial.

While Congress recently passed legislation that will allow FDA to require confirmatory trials to be recruiting and ongoing prior to granting an accelerated approval, the agency is now making clear that the initial trial used to win the AA, if designed appropriately, can also serve as the trial for converting the accelerated approval into a full approval.

Clay Siegall, Morphimmune CEO

Up­dat­ed: Ex-Seagen chief Clay Sie­gall emerges as CEO of pri­vate biotech

Clay Siegall will be back in the CEO seat, taking the helm of a private startup working on targeted cancer therapies.

It’s been almost a year since Siegall resigned from Seagen, the biotech he co-founded and led for more than 20 years, in the wake of domestic violence allegations by his then-wife. His eventual successor, David Epstein, sold the company to Pfizer in a $43 billion deal unveiled last week.

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FDA ad­vi­sors unan­i­mous­ly rec­om­mend ac­cel­er­at­ed ap­proval for Bio­gen's ALS drug

A panel of outside advisors to the FDA unanimously recommended that the agency grant accelerated approval to Biogen’s ALS drug tofersen despite the drug failing the primary goal of its Phase III study, an endorsement that could pave a path forward for the treatment.

By a 9-0 vote, members of the Peripheral and Central Nervous System Drugs Advisory Committee said there was sufficient evidence that tofersen’s effect on a certain protein associated with ALS is reasonably likely to predict a benefit for patients. But panelists stopped short of advocating for a full approval, voting 3-5 against (with one abstention) and largely citing the failed pivotal study.

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No­vo Nordisk oral semaglu­tide tri­al shows re­duc­tion in blood sug­ar, plus weight loss

Novo Nordisk is testing higher levels of its oral version of its GLP-1, semaglutide, and its type 2 diabetes trial results released today show reductions in blood sugar as well as weight loss.

In the Phase IIIb trial, Novo compared its oral semaglutide in 25 mg and 50 mg doses with the 14 mg version that’s currently the maximum approved dose. The trial looked at how the doses compared when added to a stable dose of one to three oral antidiabetic medicines in people with type 2 diabetes who were in need of an intensified treatment.

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Ly­me vac­cine test com­ple­tion is pushed back by a year as Pfiz­er, Val­ne­va say they'll ad­just tri­al

Valneva and Pfizer have adjusted the end date for the Phase III study of their investigational Lyme disease vaccine, pushing it back by a year after issues at a contract researcher led to thousands of US patients being dropped from the test.

In a March 20 update to clinicaltrials.gov, Valneva and Pfizer moved the primary completion date on the trial, called VALOR, from the end of 2024 to the end of 2025.

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Stuart Peltz, former PTC Therapeutics CEO

Stu­art Peltz re­signs as PTC Ther­a­peu­tics CEO af­ter 25 years

Stuart Peltz, the longtime CEO of PTC Therapeutics who’s led the rare disease drug developer since its founding 25 years ago, is stepping down.

Succeeding him in the top job is Matthew Klein, who joined PTC in 2019 and was promoted to chief operating officer in 2022. In a call with analysts, he said the CEO transition has been planned for “quite some time” — in fact, as part of it, he gave the company’s presentation at the JP Morgan healthcare conference earlier this year.

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Bet­ter Ther­a­peu­tics cuts 35% of staff while await­ing dig­i­tal ther­a­peu­tic ap­proval

Digital therapeutics company Better Therapeutics announced on Thursday that it’s cutting 35% of its staff as it awaits FDA clearance for its first product.

The company, which launched eight years ago, is one of a growing group of companies seeking a digital alternative to traditional medicine. The space saw a record $7.5 billion in investments in 2021, according to Chris Dokomajilar at DealForma, with uses spanning ADHD, PTSD and other indications. However, private insurers have been slow to hop on board.