RA Capital Management has formed a new blank-check entity that it aims to take public and merge with a biotechnology or healthcare company in China.
In a securities filing on Tuesday, the prominent venture capital firm outlined plans for its “Research Alliance III” to seek out a “target company” in China — the source of a large and growing number of drug licensing deals — to acquire or merge with. It plans to sell 5 million shares in the special purpose acquisition company, or “SPAC,” at $10 apiece, to fund the effort.
SPACs grew in popularity in 2020 and 2021, giving private biotechs an alternative, speedy route to Wall Street with less oversight than a traditional IPO. They fell out of favor in the following years as returns disappointed, but have re-emerged of late as the IPO window largely remained shut for biotech companies.
“We believe that the current state of the biotechnology IPO market may enhance our ability to locate an attractive target,” the SPAC wrote in its filing, claiming that there is still “tremendous investor demand” for drug company IPOs despite the ongoing slowdown.
The rebound in SPAC activity is due, in part, to the return of experienced backers with past successes. RA Capital, which has carried out two over the last decade, is among them. One merged with Point Biopharma, a radiopharmaceutical developer that sold in 2023 to Eli Lilly. A second, Research Alliance II, priced an offering in 2021 but moved to liquidate afterwards.
In planning its latest offering, RA Capital also intends to again capitalize on promising clinical assets from China, where a fast-accelerated biotech ecosystem has produced a large inventory of drug prospects. Among the firm’s past investments are Aiolos Bio, built around an asthma drug licensed from Hengrui Pharmaceuticals and later sold to GSK; Metsera, which was acquired by Pfizer for $10 billion; and Candid Therapeutics, which is planning a reverse merger with Rallybio.
“We believe that similar newly formed companies will continue to be formed and could become suitable merger targets,” the firm wrote in its IPO filing.
Research Alliance III is led by Matthew Hammond, a partner at RA Capital who was previously chief financial officer of its first SPAC before it merged with Point.
Recently, fellow biotech investor Cormorant Asset Management priced a $150 million IPO for its own blank check company.
