- Roivant Sciences, an unusual holding company with roughly a dozen biotech subsidiaries, will go public through a merger with a blank-check entity in a deal that values the company at $7.3 billion.
- Roivant will get $611 million in cash by merging with Montes Archimedes Acquisition Corp., a special purpose acquisition company, or SPAC, formed by Patient Square Capital. That figure includes $411 million already in a Montes Archimedes Trust and a commitment by Patient Square and other investors to buy $200 million in Roivant stock at $10 apiece.
- The agreement will leave Roivant, whose subsidiaries have had both high-profile successes as well as failures, with $2.3 billion in cash upon going public. The deal, one of the larger SPAC mergers in biotech, comes amid signs the boom in such deals may be waning. Returns are down, while many SPACs are in competition for takeover targets. Federal oversight, meanwhile, appears to be increasing.
The proposed merger marks the latest step in a seven-year effort by biotech investor Vivek Ramaswamy to build a life sciences company that plucks drugs from the shelves of pharmaceutical companies and houses them within smaller biotechs for development.
Roivant, which Ramaswamy formed in 2014, is the parent company for a group of similarly named "Vant" subsidiaries. Each are meant to advance drugs in specific therapeutic areas. Roivant isn't alone in this approach; a growing number of companies, such as BridgeBio, PureTech Health and most recently, Centessa Pharmaceuticals, have been built with similar "hub-and-spoke" style strategies. BridgeBio and PureTech are both publicly traded, and Centessa outlined plans for an initial public offering a few weeks ago.
Roivant is next in line. Since it started up in 2014, the company has brought over 40 medicines into clinical development. That effort hasn't been without its failures. Axovant Sciences, the first Roivant company to go public, restructured and changed its name after a high-profile, unsuccessful plan to license and test a shelved Alzheimer's drug from GlaxoSmithKline.
But Roivant has continued to grow. Several of its other companies, like Myovant, Dermavant and Immunovant, have gone public through IPOs and SPAC mergers. Two Roivant companies have produced marketed medicines and a third could follow next year. Roivant offloaded five subsidiaries through a wide-ranging 2019 alliance with Sumitomo Dainippon Pharma. The Japanese drugmaker still has an option to buy six more.
An investor presentation outlining the proposed SPAC merger showed Roivant made $1.9 billion on the $433 million it invested in the subsidiaries and technology sold to Sumitomo. Ownership in publicly traded subsidiaries Immunovant and Sio Gene Therapies (formerly Axovant) and biotech Arbutus Biopharma are worth about $1.1 billion combined, according to the filing.
In January, Ramaswamy switched roles from CEO to executive chairman and promoted longtime chief financial officer Matthew Gline to the firm's top role. The change coincided with Roivant's growing ambitions to advance discovery and early-stage programs as well as license its more advanced prospects. Going public is the next step, although the company chose to forgo the traditional IPO route in favor of merging with a SPAC, which are publicly traded investment vehicles formed to buy or combine with a target private company.
Though SPACs have been around for years, they picked up considerable momentum in the tech and biotech industries last year. SPAC deals can offer private companies a way to go public with less concern about market volatility and allow earlier investors to keep a larger stake. Roivant subsidiary Immunovant, for example, merged with SPAC Health Sciences Acquisition Corp. in 2019.
But after a record-breaking 2020 for SPACs, there are signs of a slowdown. The Securities and Exchange Commission stepped up oversight of SPACs in April, warning that some of them might have to restate their financial statements. According to a recent report from the Financial Times, of the 41 SPAC deals since the start of 2020, only three are near their peak share prices. Overall, the group is down by an average of 39%. Many SPACs are still hunting for targets.
Immunovant is one cautionary tale. Shares climbed as high as about $50 apiece last year but now sit at roughly $16 apiece. In March, Roivant said it intends to propose a deal to buy back the 42.5% of Immunovant it doesn't own.
As part of the SPAC merger, meanwhile, Patient Square and some other Roivant stockholders have agreed to hold onto at least half their shares for three years. The deal should close in the third quarter.