Last week, Panacea Acquisition Corp. (PANA.U), became the latest biotech-focused SPAC to tap the market with a $125 million IPO. The entity is backed by EcoR1, a biotechnology-focused hedge fund founded in 2013. Panacea is led by EcoR1 founder, Oleg Nodelman, who has been investing in biotechnology companies for over 20 years. The rest of Nodelman’s team has a background with “value-oriented” biotechnology investments—likely having much to do with everyone’s involvement with EcoR1. While value is a rather subjective term these days, it seems apparent the SPAC will prioritize some kind of “value” factor for their target.
In recent years big pharma significantly increased its investments in private biotech companies as they see venture capital as a higher ROI endeavor than traditional R&D. Assuming they’ve made worthy investments, this could mean there are plenty of life sciences startups (and corporate sponsors) looking to go public. Additionally, the team believes they will be able to find a target with a solid risk/reward profile primarily coming from “multiple assets”, rather than relying on a single “shot on goal”. This means they expect to find value beyond just a company’s pipeline + TAM. This could include intellectual property, unreleased products, or partnerships with big pharmaceuticals developers, according to Institutional Investor.
Prior to EcoR1, Oleg Nodelman was a portfolio manager at one of the original biotech hedge funds on Wall Street, Biotechnology Value Fund (BVF), which he left in 2013 to start EcoR1. Perhaps an indication of Oleg’s perception of value, he is on the board of Prothena (PRTA), which has a pipeline of drugs anywhere from the Discovery to Phase II stages. He is a Ukrainian immigrant who grew up with an immunologist and engineer for parents, and has spent much of his professional life in San Francisco where he is involved with local charities.
Oleg’s right-hand-woman and Chief Investment Officer is Caroline Stout. She currently serves as a principal at EcoR1, and prior to that an investment banker serving biotechnology clients. It is interesting to see her board membership includes Neurogene (focused on neurological gene therapy), Accent Therapeutics (epitranscriptomics as an alternative to traditional chemo), and Prevail Therapeutics (gene therapy research for neurodegenerative disorders).
EcoR1 Capital gets its name from the EcoR1 restriction enzyme found in E. coli. These enzymes are found in bacteria and act as defense mechanisms against invading viruses. Technically, the enzyme cuts up the DNA sequence of the virus, which is useful for scientists experimenting with molecular cloning applications like gene therapy. A quick glance over their venture portfolio shows a handful of gene therapy companies focused on treating cancers neurological disorders—not surprising given leadership’s backgrounds. The fund has seen tremendous success since opening its doors in 2013, returning 34% annually to investors and having to close to new investors after just four years in business.
The deal leaves Panacea with $150M in cash when the $25M FPA is included—an amount that leaves the team with plenty of flexibility for target size. Judging by the name, however, “Panacea” means a ‘universal cure’, so perhaps the team is expecting to swing for the fences with their first deal. The terms seem appropriate given it is a first-time team with a strong resume—24 months and just a 1/3 warrant. For what it’s worth, of the 106 SPAC’s we are tracking that have filed for an IPO and are searching for a target, this is the 11th focused on the life sciences space.
Summary of terms below: