Bil­lions of dol­lars worth of SPACs are rid­ing on the biotech IPO boom

Bil­lion­aire hedge fund man­ag­er Bill Ack­man’s push to raise $4 bil­lion for his blank check com­pa­ny, Per­sh­ing Square Ton­tine Hold­ings, is cast­ing a spot­light on the SPACs. And amid a his­toric SPAC boom, biotechs are set­ting sev­er­al records on what some ob­servers say is shap­ing up to be a third ma­jor track — be­sides IPO and M&A — to go pub­lic.

Jay Heller

“SPACs were ap­prox­i­mate­ly 3% of the IPO mar­ket back in 2014, now they are al­most 35% of all new list­ings,” Jay Heller, the Nas­daq’s head of cap­i­tal mar­kets, told End­points News.

Even though bio­phar­ma ap­pears large­ly un­scathed by the volatil­i­ty in the broad­er pub­lic mar­ket, see­ing in­stead a his­toric run of de­buts, SPACs have still emerged as an al­ter­na­tive ve­hi­cle that can off­set some risks.

Es­tab­lished more than three decades ago, SPACs, or spe­cial pur­pose ac­qui­si­tion com­pa­nies, are es­sen­tial­ly clean­er re­verse merg­er shells for pri­vate com­pa­nies look­ing to make a quick flip to the pub­lic mar­ket. The way it works: An in­vest­ment firm would cre­ate a cor­po­ra­tion and file for an IPO based on noth­ing but its rep­u­ta­tion for pick­ing out win­ner op­por­tu­ni­ties — and the team has two years to do so af­ter rais­ing the cap­i­tal, sole­ly re­served for buy­ing out an ex­ist­ing com­pa­ny.

While it’s had a check­ered past tied with fraud­u­lent out­fits, blue chip spon­sors from RTW In­vest­ments to Per­cep­tive Ad­vi­sors are in­creas­ing­ly set­ting up their own SPACs.

For both in­vestors and com­pa­nies (as well as their orig­i­nal back­ers), it saves time and trou­ble ne­go­ti­at­ing terms or set­ting a price — al­though ex­ist­ing share­hold­ers do have the right to vote down a merg­er last minute.

Jonas Gross­man

“We pre­dict­ed at least six biotech fo­cused SPACs this year and we are al­most there,” said Jonas Gross­man, the pres­i­dent of Chardan.

Chardan raised $70 mil­lion to cre­ate its own SPAC, Chardan Health­care Ac­qui­si­tion, back in 2018. It then ze­roed in on Bio­mX, an Is­raeli mi­cro­bio­me-fo­cused biotech, as a merg­er tar­get, bring­ing the first and on­ly biotech SPAC com­bi­na­tion of 2019.

Since then, RTW’s Health Sci­ences has com­bined with Im­muno­vant, Per­cep­tive’s Arya Sci­ences has merged with Im­mat­ics, EcoR1’s Panacea has priced its $125 mil­lion IPO, and LifeSci Ac­qui­si­tion Corp has raised $60 mil­lion. Chardan it­self has pooled $85 mil­lion for a sec­ond SPAC.

Last week, Ther­a­peu­tics Ac­qui­si­tions — a SPAC spon­sored by RA Cap­i­tal — marked an­oth­er first by an IPO by sell­ing $118 mil­lion worth of com­mon shares rather than units. Prac­ti­cal­ly, it means that the of­fer­ing didn’t in­clude any trad­able war­rants, which used to be a fix­ture in such pub­lic list­ings.

The com­pa­ny had ini­tial­ly struc­tured the IPO based on units, Heller of Nas­daq not­ed, con­sist­ing of one share of Class A com­mon stock and one-third of one re­deemable war­rant.

“They were prob­a­bly able to re­struc­ture the deal be­cause of strong in­vestor de­mand,” he wrote. “The af­ter­mar­ket trad­ing of this se­cu­ri­ty will be a test to see if this will be adopt­ed by fu­ture SPACs.”

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His­toric drug pric­ing re­forms pass; Pfiz­er ac­quires GBT; The long search for non-opi­oid pain drugs; and more

Welcome back to Endpoints Weekly, your review of the week’s top biopharma headlines. Want this in your inbox every Saturday morning? Current Endpoints readers can visit their reader profile to add Endpoints Weekly. New to Endpoints? Sign up here.

The Endpoints Weekly has officially crossed the 60,000 mark on subscribers — thanks to all of your support. As the editorial team grows, we’ve been able to do a lot more, with many of those on display this week. Be sure to check out Lei Lei Wu’s deep dive on pain R&D. If you missed it, you may also rewatch her companion panel here.

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Gold for adults, sil­ver for in­fants: Pfiz­er's Pre­vnar 2.0 head­ed to FDA months af­ter Mer­ck­'s green light

Pfizer was first to the finish line for the next-gen pneumococcal vaccine in adults, but Merck beat its rival with a jab for children in June.

Now, two months after Merck’s 15-valent Vaxneuvance won the FDA stamp of approval for kids, Pfizer is out with some late-stage data on its 20-valent shot for infants.

Known as Prevnar 20 for adults, Pfizer’s 20vPnC will head to the FDA by the end of this year for an approval request in infants, the Big Pharma said Friday morning. Discussions with the FDA will occur first and more late-stage pediatric trials are expected to read out soon, informing the regulatory pathway in other countries and regions.

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Seagen interim CEO Roger Dansey and Daiichi Sankyo CEO Sunao Manabe

Paving the way for Mer­ck­'s buy­out, Seagen los­es ar­bi­tra­tion dis­pute with Dai­ichi over ADC tech

As Seagen awaits a final buyout offer from Merck that could be in the territory of $40 billion, Seagen revealed Friday afternoon that it lost an arbitration dispute with Daiichi Sankyo relating to the companies’ 2008 collaboration around the use of antibody-drug conjugate (ADC) technology.

But that loss likely won’t matter much when it comes to Merck’s deal.

After breaking off its pact with Daiichi in mid-2015, the two companies battled over “linker” tech — a chemical bridge between an ADC’s antibody component and the cytotoxic payload — that Seagen claims Daiichi would improve upon and implement in its current generation of ADCs.

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Tony Coles, Cerevel CEO

Cerev­el takes the pub­lic of­fer­ing route, with a twist — rais­ing big mon­ey thanks to ri­val da­ta

As public biotechs seek to climb out of the bear market, a popular strategy to raise cash has been through public offerings on the heels of positive data. But one proposed raise Wednesday appeared to take advantage not of a company’s own data, but those from a competitor.

Cerevel Therapeutics plans to raise $250 million in a public offering and another $250 million in debt, the biotech announced Wednesday afternoon, even though it did not report any news on its pipeline. However, the move comes days after rival Karuna Therapeutics touted positive Phase III data in schizophrenia, a field where Cerevel is pursuing a similar program.

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House pass­es his­toric drug pric­ing re­forms, lin­ing up decades-in-the-mak­ing win for Biden and De­moc­rats

The US House of Representatives today voted along party lines (all Dems voted for it), 220-207 to pass new, wide-ranging legislation that will allow Medicare drug price negotiations for the first time ever, and cap seniors’ drug expenses to $2,000 per year and seniors’ insulin costs at $35 per month.

Setting up a major victory for President Joe Biden, representatives returned from their summer recess to pass the Inflation Reduction Act, even as many noted the bill would only modestly reduce inflation.

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Senate Finance Committee Chair Ron Wyden (D-OR) (Francis Chung/E&E News/POLITICO via AP Images)

Sen­ate Fi­nance chair con­tin­ues his in­ves­ti­ga­tion in­to phar­ma tax­es with re­quests for Am­gen

Amgen is the latest pharma company to appear on the radar of Senate Finance Committee Chair Ron Wyden (D-OR), who is investigating the way pharma companies are using subsidiaries in low- or zero-tax countries to lower their tax bills.

Like its peers Merck, AbbVie and Bristol Myers Squibb, Wyden notes how Amgen uses its Puerto Rico operations to consistently pay tax rates that are substantially lower than the U.S. corporate tax rate of 21%, with an effective tax rate of 10.7% in 2020 and 12.1% in 2021.

FDA ap­proves sec­ond in­di­ca­tion for As­traZeneca and Dai­ichi's En­her­tu in less than a week

AstraZeneca and Daiichi Sankyo’s antibody-drug conjugate Enhertu scored its second approval in less than a week, this time for a subset of lung cancer patients.

Enhertu received accelerated approval on Thursday to treat adults with unresectable or metastatic non-small cell lung cancer (NSCLC) whose tumors have activating HER2 (ERBB2) mutations, and who have already received a prior systemic therapy.

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J&J to re­move talc prod­ucts from shelves world­wide, re­plac­ing with corn­starch-based port­fo­lio

After controversially spinning out its talc liabilities and filing for bankruptcy in an attempt to settle 38,000 lawsuits, Johnson & Johnson is now changing up the formula for its baby powder products.

J&J is beginning the transition to an all cornstarch-based baby powder portfolio, the pharma giant announced on Thursday — just months after a federal judge ruled in favor of its “Texas two-step” bankruptcy to settle allegations that its talc products contained asbestos and caused cancer. An appeals court has since agreed to revisit that case.