Two of biotech’s biggest trends — the rise of SPACs and the Scrooge McDuck piles of cash suddenly available to life sciences company on New York trading floors — converged late Wednesday in one of the largest life sciences SPAC offerings yet: $385 million.
The new fund, known as CM Life Sciences, comes from the life sciences investment firm Casdin Capital and the New York hedge fund Corvex Management. It marks Casdin’s first specialty acquisition company, as they follow Perceptive Advisors, RTW Investments and other blue-chip life science firms into a form of investing that, while still new to biotech, is growing in popularity and has already looked profitable in a handful of early cases.
The new offering, though, stands out for its sheer size. The handful of biotech SPACs so far have generally come in around $100 million. The 2018 Chardin offering that is generally credited as the first biotech SPAC was for $70 million. RA Capital’s more recent Therapeutics Acquisition Corp priced in June at $118 million.
Fueling the raise, which was first filed for in mid-August, is a pandemic stock market that has funneled unprecedented dollars into life sciences company, allowing biotechs that remain years from the clinic to raise upwards of $200 million in IPOs and for the flashiest companies to surpass $400 million. But it also amounts to a bet that, within the 2-year window the SPAC has to merge with biotech, the market will remain favorable enough for Casdin to find a good home for its $385 million vault.
In July, Cerevel went public in a $445 million SPAC transaction, but the vast majority came from outside investors. The Perceptive Advisors SPAC they merged with had previously raised $130 million.
The new fund also comes against the backdrop of a broader openness toward large SPACs. Most notably, in July, Bill Ackman launched a $4 billion SPAC, the largest in history.
SPACS have grown in popularity — Nasdaq capital markets chief Jay Heller recently estimated they now make up almost 35% of new listings, compared to 3% in 2014 — because they offer an enticing package for both investors and companies. For companies, it’s a way to go public without the complicated process and risk of an IPO. For shareholders, it’s a bet that an elite investor with experience in the field will be better than them at picking companies.
Led by Eli Casdin, Casdin’s recent investments include co-leading a $257 million round for the liquid biopsy company Thrive, joining a $62 million Series A2 for the base editing heart disease biotech Verve. They were also investors in 23andMe, the neurodegeneration biotech Alector and the oncology biotechs Black Diamond Therapeutics and Blueprint Medicines.
Corvex has not historically invested in life sciences. The hedge fund’s most recent disclosures show a smattering of tech, healthcare and energy companies, including Netflix, Falcon Minerals, and Humana.