SPACs Surge as Biotech Booms

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Oct 15, 2020, 08:30 ET

NEW YORK, Oct. 15, 2020 /PRNewswire/ -- As the world has focused on the search for COVID vaccines and therapeutics, biotech IPOs have quietly gone bonkers. As a matter of fact, 2020 is on track to post the highest number of biotech IPOs in over five years. Along the way, biotech companies have managed to raise a lot of capital already this year. As biotech demand has surged, so has the number of biotech-focused SPACs (Special Purpose Acquisition Company). A SPAC is a company that raises capital through an IPO with the sole intent of buying or merging with another operating company. SPACs have evolved to become an expedited and cost-effective way of doing an IPO and have proved to be an attractive vehicle for biotech companies by providing ready access to capital and much greater public visibility. Many of these biotech SPACs are delivering outsized returns, bolstering both investor confidence and demand. Expectations are high to repeat previous biopharmaceutical success at 180 Life Sciences Corp. (180 Profile), which is expected to merge before year end with KBL Merger Corp. IV (NASDAQ: KBLM). The company is founded and run by four world-renowned scientists and entrepreneurs who developed the blockbuster anti-inflammatory drug Remicade. They invested their own money to start 180 Life Sciences, own the majority of the equity and aren't selling any in this transaction. Pharmaceutical giant Eli Lilly and Company (NYSE: LLY) recently announced that its anti-inflammatory drug, Olumiant, used to treat rheumatoid arthritis, may help shorten COVID-19 recovery time. Rebif, an anti-inflammatory drug from Merck KGAA ADR (OTCPK: MKKGY), is in phase 3 trials with Gilead Sciences' remdesivir for the treatment of hospitalized COVID-19 patients. Reata Pharmaceuticals Inc. (NASDAQ: RATA) is a clinical-stage biopharmaceutical company that develops novel therapeutics for patients with serious or life-threatening diseases by targeting molecular pathways involved in the regulation of cellular metabolism and inflammation. Panacea Acquisition Corp. (NYSE: PANA) is a special purpose acquisition company formed by an affiliate of EcoR1 Capital, LLC. While the company may pursue an initial business combination target in any industry, it intends to focus its search for a target business operating in the biotechnology sector. The search for COVID-19 therapies and vaccines has led to heightened public and investor interest in the inner workings of biotech. There's good reason to presume that will only intensify should biotech innovation be the force that eventually puts the pandemic behind us. Many other therapeutic breakthroughs along the way wouldn't be surprising.

Biotech IPO market best in over five years.
Many biotech SPACs coming to market during this surge.
SPACs offer faster, easier way for companies to come public.
Expectations high for 180 Life Sciences to duplicate previous success.

IPOs and SPACs Soar

The market for initial public offerings has come roaring back, with tech and biotechnology IPOs leading the charge, which coincided with the bounce back from the COVID sell off. Demand has increased across the board, which has engendered a flurry of SPACs this year. SPACs have gained favor because the traditional IPO process is inherently costly, cumbersome and risky. Most companies follow the traditional IPO process, but it's an expensive and extensive process. After months of negotiations, due diligence and road shows — bankers price the IPO and then a block of shares are sold at the set price to institutional investors — not everyone ends up pleased with either the pricing or the process.

It only took a few high-profile SPACs led by big names to show investors and companies that there are faster and simpler ways to go public other than a conventional IPO, especially during these uncertain times of COVID-19. SPACs are proving to be a good option for companies looking to go public, especially in the biotech arena. SPACs allow companies to get financed and reach the public market quicker. SPACs have also traded well, many delivering outsized returns, bolstering both investor confidence and demand.

High Expectations

KBL Merger Corp. IV is the fourth SPAC run by CEO Marlene Krauss, MD. She's a pioneer in the field, completing her first SPAC in 1998, and is a member of an elite group of only three women, including herself, who have served in the capacity of SPAC CEO and chairperson. She was also one of the first people to obtain both an MD degree and MBA degree from Harvard, and she's one of the few physicians to lead a SPAC.

That's likely the impetus for her focus in investing over $1 billion across various funds; her passion has always been about improving health care. Through her unique combination of intimate knowledge and shrewd experience, she was able to find and fund Summit Autonomous Inc., which manufactures the Summit Technology excimer laser, the first laser to be approved by the FDA for LASIK refractive eye surgery. The advent of LASIK created a new industry and a much-improved standard of care. Summit, now a subsidiary of Novartis, was sold to Alcon for $893 million. Krauss's devotion to improving lives by improving health-care solutions has led to the transaction with 180LS. Krauss and her team closely evaluated and discarded more than a dozen companies before finally selecting 180LS to merge with KBLM.

180 Life Sciences Corp. (NASDAQ: KBLM) was started by four world-renowned scientists and entrepreneurs who invested their own money to start the company. These same distinguished biomedical pioneers were the first to successfully develop new anti-inflammatory drugs in the late '90's, drugs such as the anti-TNF biologics and the anti-integrin inhibitors. These drugs are still on the market, generating multiple billions of dollars per year in sales; in addition, they have spawned a new class of therapeutics to treat inflammation. These industry leaders are also joined by a world-class board of directors. The talent and genius at 180 Life Sciences is now focused on creating the next generation of innovative anti-inflammatory drugs to inhibit the ravages of chronic inflammation and provide relief for millions of patients with inflammatory disease.

Expectations are high for 180 Life Sciences (180LS) since the founders have all succeeded at this before: developing large-market, novel anti-inflammatory drugs that were sold to big pharma for multiple billions of dollars. Now they're doing it again — but in their own unique way. They've minimized both the risk and the cost typically associated with biotechnology by creating a collaborative system of basic science and clinical trials conducted simultaneously at three major universities across the globe: Stanford University, Hebrew University and Oxford University. The international collaboration between this cadre of scientific luminaries and the effective sharing of programs and platforms developed through decades of research and clinical development has resulted in the creation of 180LS, a company that already has three drug platforms at various stages of clinical development.

180LS's primary targets are fibrosis and inflammation using anti-TNF therapy, which suppresses the immune system by blocking the activity of a substance in the body that can cause inflammation and lead to immune-system diseases. The Fibrosis & Anti-TNF program based at Oxford University is completing phase 2b/3. This program is led by Jagdeep Nanchahal, a surgeon-scientist running the phase 2 trials, and Marc Feldmann, a world-renowned immunologist and a pioneer of anti-TNF therapy. Preclinical studies in liver fibrosis and nonalcoholic steatohepatitis (NASH) are set to begin in late 2020. Two additional clinical programs are projected to start Q3/4 2021 with a grant awarded by the UK's National Institute for Health Research.

The other two preclinical programs are Inflammatory Pain, directed by Raphael Mechoulam at the Hebrew University in Israel, which is focused on discovering novel compounds to treat chronic inflammatory pain; and A7nAChR, which is led by Lawrence Steinman and Jonathan Rothbard, MD, seeking to develop a treatment for ulcerative colitis in ex-smokers by targeting the a7nAChR, a nicotine receptor in the body and a central factor in the body's method of controlling inflammation. James N. Woody, MD, is CEO of 180LS and was instrumental in the discovery of Remicade, the first anti-TNF blockbuster, as chief scientific officer at Centocor. Woody previously served as general manager of Roche Biosciences, the former Syntex Pharmaceutical Company, and founded Avidia and Proteolix, both of which were subsequently sold to Amgen.

This unique global collaboration of scientific pioneers and biomedical entrepreneurs mitigates costs and risks while maximizing opportunities for 180LS. The team's cumulative experience, acumen and respect from big pharma enhances opportunities for developing drugs to commercialization as well as increased opportunities for licensing and joint ventures.

Turning Opportunity into Tangibles

To bring opportunity to fruition is never convenient — it requires hard work, intelligence and diligence. Due to the vision and diligence of Dr. Krauss, 180 Life Sciences is expected to merge with KBL Merger Corp. IV before year end, obtaining needed capital to press its mission to completion.

This is an opportunity to potentially affect the trajectory of treatment protocols for millions of patients with untreatable inflammatory disease and these vast unmet medical needs may soon have new solutions created from the hard work and the brilliance of the collaborative team at 180 Life Science. For investors, it's also an opportunity to participate in a potential blockbuster drug spawned from a SPAC. It's been a heck of a year, and the best may be on the horizon.

Biotech Bonanza

American pharmaceutical giant, Eli Lilly and Company (NYSE: LLY) was founded in 1876 by a pharmaceutical chemist and veteran of the American Civil War. Eli Lilly recently announced its anti-inflammatory drug used to treat rheumatoid arthritis, may help shorten COVID-19 recovery time. The study tested baricitinib, a pill that Lilly already sells as Olumiant to treat rheumatoid arthritis, the less common form of arthritis that occurs when a mistaken or overreacting immune system attacks joints, causing inflammation. An overactive immune system also can lead to serious problems in coronavirus patients.

Founded in 1668 in Darmstadt, Germany, Merck KGAA ADR (OTC: MKKGY) is the world's oldest pharmaceutical and chemical company and is committed to advancing gene editing technologies and discovering unique ways to treat the most challenging diseases. The company has invested substantially in developing new therapies and medical technologies, particularly in regards to cancer and chronic progressive diseases. The NIH’s National Institutes of Allergy and Infectious Diseases (NIAID) recently launched a phase 3 trial of Gilead Sciences’ remdesivir with Merck’s anti-inflammatory drug Rebif (interferon-beta-1a) for the treatment of hospitalized COVID-19 patients.

Reata Pharmaceuticals Inc. (NASDAQ: RATA) is a clinical-stage biopharmaceutical company that develops novel therapeutics for patients with serious or life-threatening diseases by targeting molecular pathways involved in the regulation of cellular metabolism and inflammation. Reata's two most advanced clinical candidates (bardoxolone methyl and omaveloxolone) target the important transcription factor Nrf2 to restore mitochondrial function, reduce oxidative stress, and resolve inflammation.

Panacea Acquisition Corp. (NYSE: PANA) is a special purpose acquisition company formed by an affiliate of EcoR1 Capital LLC. While the company may pursue an initial business combination target in any industry or geographic location, PANA intends to focus its search for a target business operating in the biotechnology sector.

This year may well be remembered as the year of the biotech and SPAC IPO. If past is prologue, expect even more biotech deals in the months and years to come. The ready access to capital and speed to public markets make SPACs attractive vehicles, especially for biotech companies such as 180 Life Sciences.

For more information about 180 Life Sciences Corp., please visit 180 Life Sciences Corp. and see the 180 Life Sciences company presentation.

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