Somalogic Inc. has agreed to go public via a merger with blank-check company CM Life Sciences II. Upon closing, CMLS II – a special purpose acquisition company (SPAC) sponsored by affiliates of Casdin Capital LLC and Corvex Management LP – will be renamed Somalogic and its common stock listed on the Nasdaq Global Market under the ticker symbol SLGC.

The transaction, announced Monday, is the latest in a stream of medtech-SPAC combos, an increasing popular route to an IPO.

In February, Stamford, Conn.-based Sema4 nailed a merger agreement with CM Life Sciences aimed at advancing its artificial intelligence (AI)- and machine learning-based integrated genomic and clinical open-architecture data platform. Days later, Humacyte Inc., a Durham, N.C.-based startup that develops universally implantable, bioengineered human tissue at commercial scale, of Durham, N.C., announced plans to merge with Alpha Healthcare Acquisition Corp. Also last month, hand-held, single probe, whole-body ultrasound company Butterfly Network Inc., of Guilford, Conn., completed its business combination with Longview Acquisition Corp.

Terms of the transaction

This latest combination is expected to yield cash proceeds of up to $651 million for proteomics startup Somalogic, expanding the cash on its balance sheet to $686 million to drive organic and inorganic growth in the nascent field of proteomics. The Boulder, Colo.-based company previously raised $581.5 million in funding, most recently in a series A late last year that reeled in $214 million.

Financing for the merger includes approximately $276 million in CMLS II’s trust account, plus a fully committed PIPE (private investment in public equity) of $375 million from new and existing investors. In addition to Casdin Capital and Corvex Management, the list includes Janus Henderson Investors, SB Management, T.Rowe Price. Separate accounts advised by Ark Invest, Farallon Capital, Perceptive Advisors, funds and accounts managed by Morgan Stanley’s Counterpoint Global. Also participating are new strategic investor Illumina Inc. and existing strategic investor Novartis Pharma AG.

The deal values Somalogic at a premerger value of $1.23 billion. Upon closing, up to $50 million of the $651 million in proceeds will be used to repurchase shares from legacy investor shareholders. The remainder will be used for Somalogic’s operations, including technology development, new product offerings, commercial infrastructure growth and pursuing new health system partnerships.

“This is a powerful combination for Somalogic that will bring significant capital and intellectual resources to propel the next chapter of the company’s growth,” said Roy Smythe, Somalogic’s CEO.

“We believe we are uniquely positioned as a first-mover across various market segments and a leader as both a proteomics research enable and proteomics clinical applications company, he added, saying the planned combo would “super charge” Somalogic’s commercial growth strategy.

In conjunction with the merger, Somalogic expects to add Kevin Conroy, chairman and CEO of Exact Sciences Corp., Troy Cox, former CEO of Foundation Medicine Inc. and senior vice president of U.S. bio-oncology for Genentech Inc., and Steve Quake, Lee Otterson professor of bioengineering and professor of applied sciences at Stanford University, to its board of directors.

Promise of proteomics

Proteomics has the potential to increase precision medicine by identifying protein markers for diagnostics purposes and drug discovery targets.

During an investor presentation, Smythe differentiated Somalogic from other proteomics companies, saying its “evolutionarily advanced platform” includes the world’s only proteomics database with more than 500 samples, about half of which have clinical data, as well as a bioinformatics capability to look at the data and create derivative products.

“We have more than 300 customers and collaborators, we’ve generated almost $60 million in revenue by this past year, and we’ve actually been moved up the food chain by some of those customers,” he said, noting Novartis AG has elevated Somalogic’s platform from a discovery tool to a clinical drug development tool.

The Somascan assay currently measures 7,000 human proteins in a single sample, “on the way to 10,000, and there is no limit to the number of proteins we can measure on this platform over time.”

Other strategic partners include Tokyo-based Otsuka Pharmaceutical Co. Ltd. and Agilent Technologies Inc., of Santa Clara, Calif.

Eye on diagnostics

To date, most of Somalogic’s revenue has stemmed from research and discovery and biopharma. However, the company sees a large opportunity in the clinical diagnostics space. Of an estimated $90 billion available proteomics market, $40 billion is focused on diagnostic applications, Smythe said. So far, Somalogic has launched 10 tests and has a pipeline of more than a hundred, including 20 that have been validated. Use cases range from early detection, risk prediction and disease progression to patient/population risk stratification, proprietary test development, multiomic product development and treatment selection/companion diagnostics/response prediction.

With nucleic acid as its protein capture identification and measurement analyte, Smythe sees a strong trajectory for the platform to move from the current measurement readout system to additional systems like alternative arrays, next-generation sequencing “and even using its reagents in the newer protein sequencing and fingerprinting technologies.”

It’s first-generation tests leverage machine learning models of between 16 and 360 proteins that correlate with a particular disease or condition, or future trajectory of disease. “Within models, we can bin the risk of individuals using a data source that no one’s ever used before. And what we’re seeing is not only can we detect early disease, but we can predict risk in ways that was not possible previously,” leading to earlier intervention, Smythe said.

“The long promised power of proteomics is quickly becoming a commercial and clinical reality, and in our view, Somalogic is the leading platform in the field,” said Eli Casdin, CEO of CMLS II. “What is needed to accelerate this transformation from promise to reality is human and financial capital, and the CMLS II team could not be more honored to provide both through this merger.”

The transaction has been approved by the boards of the two companies. It is expected to close during the third quarter of 2021, pending regulatory approvals.