Welcome to SPACInsider’s Spotlight series! With this, we will seek to illuminate a particular trend in SPACs that deserves a greater focus. This week, we will be looking at the ways that SPACs can play a part in propelling the ongoing vaccine rollout and boost developments in immunology, with research compiled by SPACInsider contributors Anthony Sozzi and Sam Beattie.
Most long-time SPAC watchers did not have 2020 penciled in as the year that SPACs would be building the cars of the future and becoming one of the largest asset classes for investing in electrifying fleets and pushing new green technologies. Then again, 2020 brought plenty of unexpected twists.
Now, simply seeing where large markets are growing is enough to predict where SPACs will strike next. One of last year’s surprises – the coronavirus – is sure to keep demand for vaccine production high, and while much of the first wave of this work has come from pharma majors, there is still space for smaller biotech firms to take part.
This week saw this put into practice with Environmental Impact’s (NASDAQ:ENVI) announced combination with vaccine-maker GreenLight Biosciences. Vaccines are only a part of what GreenLight is developing, but they constitute among its biggest markets, with its COVID vaccine expected to roll out in 2023 and a seasonal flu vaccine release slated for 2025.
Plenty more biotech firms with manufacturing capacity stand to get into that game as new variants emerge and boosters are required. It just so happens that a SPAC with a particularly prominent CEO and chairman is searching in this area and if you’ve read our other Spotlights over the past month, you know where this is headed.
Chamath Palihapitya’s Social Capital Suvretta IV (NASDAQ:DNAD) is focused on immunology, and while recent issues around some of his former targets have led to a perception his star has lost a little bit of its shine, market realities and Twitter buzz are not the same thing. SPACInsider has begun tracking the de-SPAC trading performance of the most prolific management teams and, while a more thorough analysis of our findings is forthcoming, we can share a few hints.
Among them: Despite some perception to the contrary, Palihapitiya’s de-SPAC’d companies collectively outperform all of the other prominent teams we examined as of Wednesday’s close with a median trading price of $15.70 and an average price of $16.72.
For instance, companies that went public via Alec Gores-led SPACs (plus Gores II (NASDAQ:GMII), which is nearing close with Sonder) finished Wednesday at a median price of $13.81 and average of $12.97. The fact that Gores SPACs have done twice as many deals (eight) as Palihapitya vehicles (four) over this period naturally flattens their numbers a bit. Nonetheless, it is notable that the market is still broadly buying what Palihapitiya is selling, which makes his biotech forays interesting to track.
Social Capital Suvretta IV could opt to follow in the footsteps of Big Cypress (NASDAQ:BCYP), which announced a June deal with SAb Therapeutics, which is developing a raft of antibodies treatments including a fast-tracked COVID-19 therapy. Having an iron in the fire in the fight against the big disease of the moment has buffeted a variety of SPAC targets, including NRX Pharmaceuticals (NASDAQ:NRXP). NRX closed yesterday at $15.40 and has generally traded well since May completion of its merger with Big Rock, despite a rocky overall process that saw 91.6% of Big Rock’s shares redeemed through five extension votes.
The field of immunology is far broader than vaccines or treatments for specific diseases, though. As the broader public learned in the course of the pandemic, among the most vulnerable to the virus were those with compromised or suppressed immune systems. While some of this is due to chronic ailments, a recent study found that 2.8% of insured patients were on immunosuppressant drugs. These medications are a bit of a necessary evil in the medical field as they slow down the immune system when it is causing problems of its own, but can leave patients open to other potentially serious infections.
Human immune systems have a variety of weapons for fighting off intruders, but frequently cause collateral damage to otherwise healthy tissues or are fighting an enemy that doesn’t exist at all. One way that SPACs could be a positive propellant in the coronavirus fight is in further funding companies that are developing alternatives to immunosuppressants. Social Capital Suvretta IV’s prospectus notes that it is specifically looking at immunology treatments for the skin, lungs and gastrointestinal system as well agents that aid the organ transplantation process.
One such company is ITBMed Biopharmaceuticals, which is developing a treatment that could allow liver transplant patients to avoid immunosuppressants altogether. But there is a chance that a SPAC could aim for a much greater mantle – that of curing a high-profile disease altogether. American Gene Technologies is currently in Phase I trials for a treatment it believes could cure HIV, a decades-long scourge that attacks the immune system.
Last month, the company was given the go-ahead to continue with their trial after participants showed no adverse effects from the treatment. Its treatment involves removing immune cells from the body so that they can be modified, improved and re-infused into the body resilient enough to combat the HIV virus. This is an approach that biotech firms targeting other diseases have been studying and American Gene is eager to accelerate trials to test its platform in other areas including cancer.
If Social Capital Suvretta IV winds up looking at a more specific organ area, its in-house gastrointestinal expertise may tip its hand somewhat. Its Board member Amit D. Munshi also serves as President and CEO of Arena Pharmaceuticals (NASDAQ:ARNA), which has multiple drug candidates entering Phase III trials for treatments against bowel ailments.
For an approach that would give it a broader market, other immunology-focused SPACs like Omega Alpha (NASDAQ:OMEG) and Turmeric (NASDAQ:TMPM) may also look at the medical device side of things. MeMed produces an immune-personalized diagnostic device designed to quickly determine whether the source of a existing condition is a viral or bacterial infection.
This diagnostic difference drives a large portion of routine doctor visits and the answer determines vastly different treatment courses. But, gaining certainty on whether a condition is ultimately viral or bacterial can be met with some trial and error, which could provide demand for MeMed devices all the way down to the smallest clinics and solo practioners’ offices. Last month, its countertop device was cleared in Europe with a CE Mark certification as a tool to gauge the severity of COVID-19 infections.
As such, SPACs have a number of avenues to explore in the immunology space, and the asset class could possibly use some headlines showing how they’re saving the world at the moment. After all, the sector that SPACs have most meaningfully pushed forward – electric vehicles – also happens to account for the de-SPACs that are consistently trading the best as well.