Axios Pro: Health Tech Deals
April 29, 2022
Axios Pro Exclusive Content

We made it to Friday, Health Techies.

🎤 Situational awareness: Sarah is heading to Boston for the American Telemed Association's annual conference, where on Monday she'll sit down to chat telehealth and care navigation with Glen Tullman, CEO of Transcarent and founder of Livongo, the company whose acquisition by Teladoc just triggered a $6.6B impairment charge. (More on that below.)

1 big thing: A SPACtacle's reflection

Illustration of a personal check in the shape of a checkmark in a box
Illustration: Annelise Capossela/Axios

Eric Schadt doesn't regret the decision to take his genomics company, Sema4, public via a SPAC, even though its stock began to plummet less than a month after the deal.

Why it matters: With few digital health (ahem, any) companies expressing interest in SPACs now, it's worth remembering what all the short-lived rage was about.

Flashback: Connecticut-based Sema4, a venture of Mount Sinai Health System, went public via a SPAC merger last July at a $3 billion valuation.

  • Since its founding in 2017, Sema4 had collected roughly $371 million from backers including Blackstone, Blackrock Innovation Capital Group and Deerfield Management.

Be smart: Sema4's team debated taking a SPAC or IPO route to the public market and ultimately chose the former because "we saw it as a growth hack," Schadt says.

Context: As the company's executives considered their go-public options, its priority was filling its precision testing portfolio with offerings including whole exome clinical diagnostics.

What he's saying: While Sema4's stock begun a gradual decline in August, Schadt says the merger gave it access to the appropriate amount of cash — $500 million — when the company needed it.

  • In January, Sema4 agreed to acquire genomic testing company GeneDx for roughly $623 million, giving it the whole exome sequencing capabilities it wanted and creating one of the largest U.S. genomic screening providers in the process.
  • "It was tough. I thought there’d be better tolerance and the SPAC would let you grow into," Schadt tells Axios. "But what it did provide is the access to the right scale of capital at the exact right time."

Yes, and: The SPAC route also gave Sema4 access to experienced sponsors who other experts say can help scale and contribute to the company’s future efforts.

  • "Having a sponsor like an Eli Casdin who understood where we were at felt like a better strategy at the time," than going the traditional IPO route, Schadt says.
  • Had they tried the traditional path to the public markets, they might be stuck with no clear exit route, he adds. "So it did work out," he says.

What's next: Schadt hopes the company will ultimately function as a kind of platform of algorithms capable of tracking a patient's wellness over time, including their response to treatment.

  • "In 10 years, I want to have a platform of algorithms, a billion of those queries running, and that’s the business," he says. "And those who provide them will get paid when they’re used."
  • "Ultimately it’s about setting the standards for data to derive that insight and wire it into clinical workflows to track a patient's progression over time."

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