The pandemic has caused a 250 percent surge in special purpose mergers and acquisitions within the biotech space, a study by GlobalData found.The data and analytics company said Special Purpose Acquisition Companies, or SPACs, offer a low-risk transaction and increased certainty for businesses in the biotech space.“However, the investor takes more risk, as they are investing without the same standards of disclosure,” Madeleine Roche, pharma analyst at GlobalData, added in a statement. “A SPAC allows a target company to go public with a simpler and quicker process than with an IPO, as the money has already been raised.”In the Valley, Sylmar’s Second Sight Medical Products entertained the possibility of a partnership business combination acquisition or investment in other businesses after announcing wind-down operations in March.The company seems to have rebounded for now, with R&D of its next-generation visual prosthetics system, the Orion, resuming at Ronald Reagan UCLA Medical Center in Westwood and about six of its 84 laid off employees returning to work.SPACs are companies with no commercial operations. They raise money on public markets with the aim of acquiring an existing company, so investors count on the expertise of the SPAC’s principal executives.Roche said the trend is still so new that its superiority to traditional IPOs remains to be seen — mainly because companies that went the SPAC route still need regulatory approval.Also, it’s unclear whether this trend will persist once traditional IPOs can continue unhindered by the pandemic. Initial public offerings in the biotech industry overall are up 59 percent compared to the entirety of 2019, according to the report.The Business Journal’s sister paper in Los Angeles reported that of all U.S. initial public offerings through June, SPACs accounted for 35 percent; that’s based on data from Silicon Valley Bank.
