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Large Battering of Biotech Stocks Causes SPAC Decline

SPAC was the trendiest acronym on the market in late 2020 and the first half of 2021, but biotechs are less keen to seal mergers with blank check firms these days, so SPAC appears to carry more baggage. Transactions involving special purpose acquisition companies that appeared to be close to completion are stalling. After a June 2021 agreement, Valo Health, which was founded by Flagship Pioneering, terminated its $750 million transaction with Khosla Ventures’ blank check in November 2021.

Days before the parties pulled out of the deal, the corporation had increased its private investment in public equity, or PIPE. The arrangement between Khosla and Valo was terminated owing to “market factors.” Valo had been approached by a number of SPAC, according to a source familiar with the arrangement, and Khosla was picked because of its “technical skills and investors,” the source added on the condition of anonymity.

Instead, the clinical-stage business will shortly issue a series C, which could pave the way for a solo public market debut by the end of the year, according to the source. Medtech is also feeling the effects of the headwinds. After originally joining forces in July 2021, heart disease diagnostics business HeartFlow cancelled its arrangement with the SPAC Longview on Feb. 4 owing to “unfavourable market conditions.”

With the public market for all biotechs becoming less bubbly by the day, and a slew of issues like valuation agreement, SPAC have become “less attractive than other viable choices,” according to Stampacchia. Biotechs making comments like that are “understandable,” he added, adding that Omega Alpha also seeks the correct pricing to satisfy its shareholders.

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