A startup in Seattle Internal medicine plans to go public by merging with a shell company, Phoenix Biotech Acquisition Corp. The four-year-old biotech startup is developing potential therapeutic compounds that match molecules found in human milk.
The deal is expected to raise $178.8 million for a special acquisitions company known as a SPAC. The parties will also seek financing through a private placement, a financing arrangement that could lead to additional cash.
The combined company will be called Intrinsic Medicine and will be led by Intrinsic’s CEO and co-founder Alex Martinez and co-founder Jason Ferroneits president and chief operating officer.
Intrinsic Medicine previously applied for a public offering through a traditional IPO, but withdrew her application in July.
Human milk oligosaccharides, sugar-based molecules, are thought to help modulate the immune system and influence the collection of microbes in the gut. Some studies suggest that they may also affect neurological function.
The company has preclinical programs to develop synthetic milk oligosaccharides for atopic dermatitis, autism spectrum disorders, rheumatoid arthritis and other diseases. The new funding will support the company’s plans to initiate Phase 2 clinical trials for patients with irritable bowel syndrome.
“Through this PBAX commitment, we will challenge the status quo to deliver a differentiated class of microbiome and immunomodulatory drugs with the potential to provide real relief to individuals suffering from GBA disorders,” Martinez said in statement Monday announces the deal, citing the gut-brain axis. Baseline data from the Phase 2 trial is expected to be received in the first half of 2024.
The deal values Intrinsic Medicine at $136 million, according to a press release. PBAX shareholders must approve the deal, which is expected to close in the first half of next year. The combined company is expected to trade on Nasdaq under the symbol INRX.
“After evaluating nearly 100 biotech companies, Intrinsic was an excellent choice for our business combination,” said the CEO and director of PBAX. Chris Ehrlich in the statement. Ehrlich is a former senior managing director of the pharmaceutical investment company Locust Walk Partners, and previously served as CEO of Locust Walk SPAC, which merged with eFFECTOR Therapeutics last year.
Ehrlich 100% controlled of Phoenix stock before its IPO last year; institutional shareholders now owns about 79% of the front company.
Also known as blank check companies, SPACs re-emerged in a big way during the pandemic as capital flowed to start-ups and entrepreneurs who used SPACs to go public more quickly.
But the SPAC’s post-merger performance fell steadilyespecially since January against the backdrop of a larger market downturn, and there are more deals. CNBC called the SPAC market earlier this year oversaturated.
Four Seattle companies that went public through SPACs last year, including protein analysis company Nautilus Biotechnology, saw their stock prices spray amid a broader economic downturn.
The merger also comes amid a general rapid recharging of public offerings. According to Endpoints News’ IPO tracker, 147 biotech companies went public in 2021; 48 of these were SPAC mergers. So far this year, only 25 biotech companies have gone public, 12 through SPAC mergers.