From Merrill Lynch analytics: t’s Raining B

From Merrill Lynch analytics:


t’s Raining Biotech SPACs!
Bruce Booth Contributor
Healthcare
SPACs are all the rage today. With the IPO market booming and public investors
seeking better returns, blank check companies called “ Special Purpose
Acquisition Companies ” (SPACs) have been fueling up their tanks and chasing
down their merger targets. New ones are getting announced every day,
including in biotech: so much so that serial entrepreneur Mike Gilman tweeted
that “ it’s raining SPACs” - a sentiment that captures the frenzied downpour of
activity.
Atlas Venture has been dipping its toes into these SPAC waters. Today Gemini
Therapeutics announced their intention to be acquired by FS Development, a
blank check company formed by Foresite Capital .
Gemini is the first Atlas biotech company to be the target of a SPAC merger.
Earlier this year, two legacy Atlas fund portfolio companies backed by our
former technology partners, DraftKings and Skillz , were both targets of large and
successful SPACs. It’s hard to ignore the increasingly loud SPAC drumbeat in the
capital markets today.
Venture-backed private companies are increasingly considering the SPAC route
as an attractive path to go public. Across all sectors, SPACs used to be only a
few percentage points of the IPO market, but now they are more than a third of
all IPOs, according to NASDAQ.
I won’t get into the details of the SPAC process or structure, but I will refer
readers to a few primers on the deal structure ( here , here , here , here ).
This new SPAC momentum largely started outside of healthcare, in particular in
the tech world. Some tech investors obviously think SPACs are a great
alternative to traditional IPOs – but that’s a view not without controversy. A great
set of blogs/counter-blogs here: Benchmark’s Bill Gurley hails the virtues of the
SPAC as a way to address the “structurally broken IPO process” followed by a
defense of traditional IPOs from Andreessen Horowitz and a specific
counterpoint by others .
While emerging as a wave in tech and other sectors, the phenomenon has
definitely hit the biotech sector in recent quarters. We’ve seen new SPACs
announced by top-tier biotech investors like Casdin, Cormorant, Deerfield,
EcoR1, Foresite, MPM, Perceptive, RA Capital, RTW, and 5AM. Plus others like
LifeSci Advisors, Vesper, Chardan, and others.