Top 3 SPAC Targets: Biotech Firms in Neurology

SPACInsider contributor Anthony Sozzi this week compiled his three favorite potential SPAC targets in neurology biotech. We look at why they are compelling and why each could be a fit for a blank-check merger.

As we found in our 1H-2021 Report, Biotech accounted for the third-most announced and completed deals in the first half of 2021, but the clearest reason why now is a good time to dive deeper into biotech is more specific. Chamath Palihapitiya appears poised to energize SPAC involvement in the sector with four new vehicles listed as a result of his joint venture between Social Capital and Survetta Holdings. And, where Palihapitiya treads, other SPAC teams are sure to follow.

In the coming weeks, we are going to take a look at each of the Social Capital Survetta SPACs and the fields of medicine that they are focused on in a somewhat different format. But, for now, we’re going to look at the neurology space specifically and three companies that his team and others should have on their radars.

Survetta is an investment firm founded in 2011 with over $4.5 billion is assets that focuses on long-term investment horizons. In 2020, Survetta launched its Averill fund as a separate healthcare-oriented investment vehicle focusing on disrupting the current methods of managing or treating diseases that have thus far been a mystery to cure. With Averill posting 200% gains in its first year, it should not come as a shock that Palihapitiya and Survetta caught each other’s attention.

Social Capital Survetta I (NASDAQ:DNAA), the first of the partnership’s four biotech-focused SPACs, is concentrating on neurology. More specifically, the management team is seeking to capitalize on advancements in nervous system therapeutics, such as novel platforms to help manage and treat brain and nervous system disorders, which includes neurological and psychiatric diseases and pain management.

This is a fairly broad area of drug development that is expected to grow precipitously as the US population ages. As many as 55% of people aged 55 or older are diagnosed with at least one neurological disorder and Alzheimer’s dementia alone afflicts about 1 in 10 people over 65. As such, the market for neurological disorder drugs is expected to grow at a CAGR of 5% through 2027 to $112 billion.

Another unique card that DNAA has to play is its Director Vladimir Coric, who serves as the CEO of Biohaven Pharmaceuticals (NYSE:BHVN), a commercial-stage company focused on treating disorders of the central nervous system (CNS).

Coric has conducted clinical trials for candidates to treat various CNS disorders, including obsessive compulsive disorder, generalized anxiety disorder, major depression, schizophrenia, schizoaffective disorder, migraines, Alzheimer’s, hepatocellular carcinoma and glioblastoma.

That’s a long list, but it provides some dots to connect to the field of biotech companies advancing drug candidates in this space.

Neurotrack

Silicon Valley-based Neurotrack hosts a suite of cognitive assessments that leverage eye-tracking technology to monitor early warning signs of cognitive decline or Alzheimer’s. These digital assessments track processing speed, recognition memory, associative learning and memory, inhibition, attention and executive function.

This puts it into an interesting gap in the treatment timeline for Alzheimer’s. It is not yet an FDA-approved as a diagnostic tool for Alzheimer’s, but, in many cases, it is monitoring patients so early on that Alzheimer’s would not be diagnosable in the first place. Instead, it is currently in use as a largely tool to pick up early warning signs when interventions in diet and activity change might stave off symptoms detected by its tools.

Alzeimer’s is currently an incurable disease with 146 of 150 drug candidates over the past two decades failing to demonstrate treatment efficacy in clinical trials. As such, Neurotrack’s approach helps reduce the risk early and reduce the effects in the future. It has completed Phase I trials as it works towards a clinical debut and secured funding for Phase II in 2019.

To date, Neurotrack has raised a total of $47.56M with Social Capital investing in both the Series A and B for a total of $25.56 million. Social Capital is not the only SPAC-connected investor on its cap table, however, as its $21 million Series C was led by Khosla Ventures, which is backing one SPAC in the searching column – Khosla Ventures III (NASDAQ:KVSC) – and has filed to IPO another.

Pipeline Therapeutics

Pipeline Therapeutics is a developer of regenerative therapies designed to promote functional recovery of neurological diseases to repair different nervous system cell types to treat diseases such as multiple sclerosis (MS). The other therapies that the company is developing include treating sensorineural hearing loss by advancing therapeutics to initiate synaptic reconnection and repairing axons to restore function in neurological disorders.

In its latest VC funding round, the company raised $80M, which included a cash payment from the Survetta Capital Management’s Averill Master Fund.

Currently, the San Diego-based company is in Phase I clinical trials for its’ PIPE-307 MS program, which is set to complete in July 2021. In addition to their MS therapy, PIPE-505 which is targeting synapse and hearing regeneration, is in Phase 2 of development and will be assessed at one, two and three months following the injections.

AZTherapies

AZTherapies is a clinical-stage biopharmaceutical company that aims to change the progression of neurodegenerative diseases, extending normal cognition and function and improving quality of life for aging patients.

Currently, their pipeline of therapeutics is centered around ALZT-OP1, which, in different forms is being tested as a potential treatment for Alzheimer’s, ALS and ischemic stroke. It has already passed or is now entering Phase II clinical trials for each of these treatment cases. In their preclinical discoveries, the team is developing a chimeric antigen receptor (CAR) to direct regulatory T cells to the CNS to restore a health balance of cells in the brain.

Since 2015, AZTherapies has raised $115.3 million from biotech investors, which, has been used to progress to Phase 3 trials for its first-in-class candidate to slow the progression of Alzheimer’s disease. The trial is now complete with top-line data expected to be ready by the end of this year.

Phase III is the final step before a drug developer can formally file for an application to approve a treatment for marketing. These final steps can still take some time, but ALZT-OP1 is nonetheless close to becoming just the fifth approved Alzheimer’s treatment over the past 20 years.