Patient-centered predictive health company Sema4 said Wednesday it has inked a merger agreement with CM Life Sciences, a special purpose acquisition company led by Casdin Capital and Corvex Management. Upon closing, CM Life Sciences will be renamed and its common stock listed on the Nasdaq global market under a name and ticker symbol yet to be announced.

The transaction, expected to close in the second quarter of 2021, values Sema4 – a 2017 spinout of the Mount Sinai Health System – at approximately $2 billion. It will provide the Stamford, Conn.-based company with significant new capital to further build and scale its artificial intelligence (AI)- and machine learning-powered, integrated genomic and clinical open-architecture data platform.

“This transaction is a significant milestone for Sema4,” said Eric Schadt, Sema4’s founder and CEO. “The additional resources will allow us to greatly accelerate our business plans organically and inorganically, developing and bringing in more cutting-edge precision model solutions across multiple disease areas.”

Terms of the transaction

The deal is expected to generate proceeds of roughly $793 million at its completion, up to $343 million of which will be paid to Sema4 stockholders with the remainder earmarked for business purposes. Those include funding organic operating needs and fueling other targeted growth opportunities to deliver Sema4’s solutions to more providers and patients across a higher volume of diseases.

The $793 million includes approximately $443 million in cash held in CM Life Sciences’ trust account from its initial public offering in September 2020 plus $350 million from committed private investment in public equity (PIPE) funding from a group of investors including Casdin Capital, Corvex Management, new investors Fidelity Management & Research Company LLC, Counterpoint Global, Perceptive Advisors, SB Management, a subsidiary of Softbank Group, funds and accounts advised by T. Rowe Price and Viking Global Investors and existing investors including funds and accounts managed by Blackrock and Deerfield Management.

Under the terms of the transaction, Sema4 shareholders will receive common stock of CM Life Sciences and, at their choosing, up to $343 million in cash in exchange for shares of Sema4. Upon closing, Sema4 expects to have up to $500 million in available cash – $450 million from the transaction itself plus cash on its existing balance sheet.

Sema4 will continue to operate under the management team led by Schadt. The company’s board will include Nat Turner, co-founder of Flatiron Health, Emily Leproust, CEO of Twist Biosciences and Eli Casdin, CIO of Casdin Capital.

Sema4’s board of directors and shareholders have unanimously approved the merger, as has New York-based CM Life Sciences. The latter’s shareholders still must approve the deal.

Rapid growth, broad application

During a Wednesday conference call, Schadt said Sema4’s vision “is centered around how do we generate, aggregate and compute, on a very large scale, high-dimensional, longitudinal patient health data doing that in collaborative partnership with patient and providers … to deliver next-generation, informed insights to better diagnose and treat patients.”

Sema4’s health intelligence platform, Centrellis, currently is focused on women’s health, oncology and population health. It’s database includes more than 10 million patient genomic profiles and de-identified clinical records, integrated and delivered to provide actionable insights in clinical use cases. Schadt stressed it has broad, potential utility across a spectrum of disease and wellness, including pregnancy, autoimmune disorders, oncology, diabetes and cardiovascular disease.

In 2020, the company had revenue of $190 million, the bulk of it in women’s health, its initial application. Oncology and partnerships with pharma companies made up just 8% of the total.

That’s starting to change, Schadt said. “We see over the next three years, the biggest revenue growth of drivers will be in oncology/pharma partnerships and what we call the secondary insights side of the business, which is getting paid to interpret data which are already existing.”

Between 2020 and 2023, the company expects revenue to grow 38% to $504 million, with revenue from partnerships increasing from 4% to 30%.

In December, Sema4 partnered with Merus NV, of Utrecht, the Netherlands, to use Sema4’s genomic testing to identify patients with tumors harboring neuregulin 1 gene fusions who may be eligible for investigational treatment with the biospecific antibody zenocutuzumab in a phase 1/II clinical trial.

The company has also partnered with Janssen Research & Development LLC, a unit of Johnson & Johnson, to provide access to genomic testing and its Centrellis platform to identify patients diagnosed with cancer who may be candidates for Janssen’s oncology clinical trials. And it’s working with Toronto-based Biosymetrics Inc. and Janssen Pharmaceuticals Inc. to predict the onset of COVID-19.

“The disruptive promise in combining these genomic and clinical data sets, at the patient level, is profound but takes a team of experts, the right business model, and lots of growth capital. We therefore could not be more excited to lend our partnership and fill the balance sheet for the foremost leader in the field, Eric Schadt and the expert team he’s assembled at Sema4,” Casdin said. “With an early start, unique business strategy and more than 150 leading data scientists, this is the premier company in one of the biggest, winner-take-most markets in life sciences.”