Nuvation Bio, an cancer drug startup run by former Medivation executives, will go public through a high-value merger with a blank-check company, the latest in a series of similar transactions for the bitoech sector this year.
Nuvation will merge with Panacea Acquisition, a special purpose acquisition company run by life sciences investor EcoR1 Capital. As part of the deal, new investors such as Fidelity and existing backers including Deerfield Management will buy more than $500 million worth of Nuvation shares at $10 apiece. That investment, along with cash Nuvation and Panacea already had, will give the company $850 million in its bank account, an unusually high sum for a newly public biotech.
The transaction marks a return to the public markets for David Hung, a biotech executive who steered cancer drug developer Medivation to a $14 billion sale to Pfizer but then oversaw the failure of a closely watched Alzheimer’s medicine at Axovant Sciences. Nuvation, however, looks more like a Medivation redux, with large pipeline of experimental drugs for tough-to-treat cancers.
In 2016, David Hung was on top of the biotech world. The company he founded, Medivation, became a takeout target due to the successful, speedy development of the prostate cancer drug Xtandi and the shrewd acquisition of a second medicine, then known as talazoparib.
Hung turned big pharma’s interest into a windfall. Medivation rejected a $9.3 billion hostile bid from Sanofi and engineered a months-long, competitive auction that ended with Pfizer buying the company for $5 billion more. Pfizer now shares profits in Xtandi, one of the world’s top-selling prostate cancer drugs. And talazoparib, now known as Talzenna, was approved for breast cancer in 2018.
Hung followed that up with a shorter, and much less successful, stint at Axovant. In late 2017, an Alzheimer’s drug the company had licensed from GlaxoSmithKline failed a Phase 3 trial. Shares crumbled and a restructuring followed, as did Hung’s departure from the company. But he’s since brought other senior leaders from the Medivation team back together for another run at cancer, and now has the financial backing to make it happen.
The startup is unusual in its size and scope. Last year, it raised a $275 million Series A round from a wide range of investors, touting a pipeline of multiple experimental cancer programs discovered by Hung and ex-Medivation chemists. With the first of those drugs set to begin clinical testing next year, EcoR1 — which participated in that financing — is teaming up with an even larger investor group to give Nuvation a total of $850 million in cash.
They are doing so by taking advantage of a boom in what are known as special purpose acquisition companies, or SPACs, a once-shady alternative to the initial stock offerings that biotechs typically rely on. As their name suggests, SPACs are formed to raise funds to buy or merge with a target company and take the combined entity to a publicly traded stock exchange. The process enables a startup to go public without worrying about market volatility, and for earlier investors to keep a larger stake.
Though SPACs have been around for years, they recently picked up momentum in the tech industry. Over 150 SPAC IPOs have taken place in 2020, raising more than $57 billion. The activity has seeped into biotech, too. A number of life sciences investors have created SPACs, among them RA Capital, Deerfield Management, Perceptive Advisors and Casdin Capital. Some of them have merged with biotechs.
Perceptive, for instance, recently used an SPAC to merge with neurology drug developer Cerevel Therapeutics and raise $445 million. A Foresite Capital SPAC combined with Gemini Therapeutics and added $95 million in funding.
EcoR1’s SPAC, called Panacea, will operate under the Nuvation name after the merger, and use its bankroll to advance up to six cancer drugs. The furthest along is a compound for multiple forms of brain cancer and should begin testing in the first quarter of 2021. Nuvation is developing treatments for pancreatic cancer, acute myeloid leukemia and hormone-driven cancers as well.
The deal is expected to close early next year.
