Biotech startup EQRx on Friday said it is going public through a special-purpose acquisition company, or SPAC, deal that values the company at $3.65 billion less than two years after its launch.
Founded in January 2020, Cambridge, Mass.-based EQRx is a drug development company that promises to offer new therapies for a fraction of their existing cost by working directly with payers and providers to distribute its products, allowing it to cut down on traditional drugmakers' sales and marketing costs. A 2019 report from the Tufts Center for Drug Development estimated that it cost drugmakers $2.6 billion to bring a new prescription drug to market.
EQRx expects its merger with CM Life Sciences III to close by the fourth quarter. Once the deal is finalized, it will trade under the symbols EQRX and EQRXW on the Nasdaq Global Market.
"We want to have what we call a pull model, where we collaborate in true strategic partnership with payers, and we will not need to push our medicines through large salesforces," said president and chief operating officer Melanie Nallicheri, who previously served in executive roles at McKesson. "That lowers our commercial spend."
The company develops chemical drugs, and acquires patents to molecular therapies with promising clinical trials, which mimic the biological function of existing drugs but are distinct enough that they don't infringe on the current brand-name patents. EQRx currently has 10 clinical therapies as part of its drug portfolio, most of which are targeted at treating certain types of cancers, rheumatoid arthritis and asthma. None of the treatments have yet cleared regulatory approval, although two of the startup's drugs have completed stage-three clinical trials and "we are in talks with regulators today," Nallicheri said. She said the startup expects its first therapy to come to market by 2025.
"We want to be involved in areas where we can have a real impact on life threatening or chronic diseases that people experience and are in multibillion dollar drug classes that put significant pressure on healthcare systems, on payers, on hospitals and physician practices," Nallicheri said.
EQRx currently has strategic partnerships with payers that represent 20% of the 300 million lives in the U.S., Nallicheri said, although she declined to name which insurers and health systems the company has partnered with. She said that some represent investors in EQRx—the company has currently banked $700 million through two venture rounds, with contributions from Andreessen Horowitz, ARCH Venture Partners and GV, which was formerly Google Ventures.
The SPAC deal will provide up to $1.8 billion in cash to the startup, which the company plans to spend on expanding its portfolio of drugs, building out its drug development platform and continuing to partner with payers and providers. By next year, Nallicheri said the company aims to double its drug portfolio to represent 20 drugs that represent $200 billion in total global spend.
The company joins 12 other digital health companies that have gone public so far this year, including two that have gone public through SPACs. While public debuts are on the rise, mergers and acquisitions remain the most common exit tactic for digital health companies today, with 136 startups acquired through the end of June this year, up from 83 during the same time in 2020, according to Mercom Capital Group. The market research firm said 2021 represents the hottest year for M&A since it started tracking digital health in 2010.