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CA Healthcare Acquisition Corp.

CA Healthcare Acquisition Corp.

Jan 8, 2021 by Matt Cianci

PROPOSED BUSINESS COMBINATION: LumiraDx

ENTERPRISE VALUE: $5.033 billion
ANTICIPATED SYMBOL:  LMDX

CA Healthcare Acquisition Corp announced a definitive merger agreement with LumiraDx Limited (“LumiraDx”) a next-generation point of care (POC) diagnostics testing company. The combination reflects a value of $5.0 billion for Lumira’s existing equity, before giving effect to the transaction. Since its founding, LumiraDx has raised $700 million in equity capital including investments by Morningside Ventures, U.S. Boston Capital Corporation, The Bill & Melinda Gates Foundation, Petrichor Healthcare Capital Management and other global strategic partners.

LumiraDx is headquartered in the UK with R&D and manufacturing centers in Scotland, England and the U.S., and sales and marketing operations across Western Europe, the U.S., Japan, South Africa, Colombia and Brazil. The company has more than 1,200 employees across 17 countries.

The LumiraDx Platform simplifies, scales down, and integrates principles used in lab systems, to deliver accurate results compared to laboratory reference assays across a number of parameters, in a portable, easy-to-use point of care solution. The Platform has been designed to integrate the most commonly used assay technologies such as enzyme, immunoassay, molecular and electrolytes as well as sample types such as swab, saliva, and blood. The multi-channel, low-cost test strips allow for precise control and optimization of each test.

In addition to COVID-19, the Platform can perform tests that are commercially available or in development for other infectious disease, cardiovascular disease, coagulation disorders and diabetes. A number of regulatory submissions to expand the menu of available tests are planned or underway in the U.S., EU, UK, Japan as well as many other countries.

Later this year, subject to regulatory approval or clearance, LumiraDx also plans to launch Amira, a low-cost mass-screening and home testing system for COVID-19, which will support widespread efforts to safely reopen the economy. LumiraDx anticipates the retail price of Amira will be $2-4 per test, significantly lower than many existing COVID-19 tests currently on the market and estimates the incremental market opportunity at $5-15 billion.

SUBSEQUENT EVENT – 8-k 9/24/21

CA Healthcare Sponsor LLC and Senvest Management, LLC, entered into a Non-Redemption Agreement (“Agreement”). The Sponsor is the holder of 2,875,000 shares of CA Healthcare Acquisition Corp’s (“CAH”) Class B Common Stock.

In exchange for Investor’s commitment not to redeem the 700,000 shares of CAH’s Class A Common Stock beneficially owned by it, the Sponsor agrees to transfer to Investor 77,000 Sponsor Shares, such number calculated pursuant to the following formula:

  • (a) a fraction, the numerator of which is the total amount of capital spent by Investor in connection with the purchase of CAH’s Class A Common Stock and the denominator of which is 9 minus
  • (b) the total number of shares of CAH’s Class A Common Stock purchased by Investor.

Acknowledgment and Waiver

On September 23, 2021, CAH, the Sponsor, LumiraDx and certain individuals, each of whom is a member of CAH’s board of directors and/or management team (“Insiders”) entered into an Acknowledgment and Waiver (“Waiver”) whereby

  • (i) the parties to the Sponsor Agreement:
    • (A) waive the transfer restrictions and the forfeiture/vesting provisions included therein with respect to certain of the Sponsor Shares to be transferred in connection with the abovementioned Agreement (the “Proposed Transfers”),
    • (B) acknowledge that the forfeiture and vesting provisions set forth in the Sponsor Agreement as they apply to the Sponsor shall be determined and allocated based upon the aggregate number of Sponsor Shares held by the Sponsor after taking into account the consummation of the Proposed Transfers (including the transfer of the Sponsor Shares set forth therein) and
    • (C) approve the Proposed Transfers and
  • (ii) LumiraDx waives an interim operating covenant in the Agreement and Plan of Merger between CAH, LumiraDx and LumiraDx Merger Sub, Inc., regarding changes in the capitalization of CAH.

SUBSEQUENT EVENT – Press Release 8/20/21

LumiraDX and CA Healthcare announced they have revised the valuation of their previously announced transaction based on various considerations, including the recent market environment for publicly traded diagnostic companies, general market declines in COVID-19 testing volumes, and feedback from CA Healthcare advisors and shareholders.

  • Revised transaction terms adjust LumiraDx’s pro forma valuation for the combined group from $5 billion to $3 billion (excluding $115 million raised by CA Healthcare Acquisition Corp (“CAHC”) in its initial public offering).
  • Terms establish a more attractive entry point for investors, and a highly compelling investment thesis on an absolute and relative basis
  • Factors considered in revising the valuation include:
    • the recent market environment for publicly traded diagnostic companies,
    • general decline in COVID-19 testing market, and
    • feedback from CAHC’s advisors and shareholders
  • LumiraDx has a roadmap of 10 new test approvals over the next 24 months on its platform, including Troponin, Flu/COVID, and TB.
  • LumiraDx recently updated 2021 revenue guidance range to $300-500 million and provided 2024 revenue guidance in the range of $1-1.25 billion.

Amendment to Sponsor Agreement

  • Pursuant to the Sponsor Agreement Amendment, the parties thereto further agreed that
    • (i) if more than fifty percent (50%) of CAH’s Class A Common Stock sold in CAH’s initial public offering is redeemed, then an equal percentage of the CAH sponsor’s founder shares that would have otherwise converted into LumiraDx common shares will be forfeited, and
    • (ii) if fifty percent (50%) or less of CAH’s Class A Common Stock sold in CAH’s initial public offering is redeemed, then the CAH sponsor shall retain its entitlement to one hundred percent (100%) of its CAH founder shares and common shares, subject to the following vesting conditions (the “Vesting Conditions”):
      • (A) 60% of the Entitlement to the LumiraDx common shares will vest at closing,
      • (B) 20% of the Entitlement to the LumiraDx common shares will vest if at any time within eighteen (18) months of the closing, the LumiraDx common shares closes at $12.50 per share (or higher) for any twenty (20) days within any thirty (30) consecutive trading days, and
      • (C) 20% of the Entitlement to the LumiraDx common shares will vest if at any time within thirty-six (36) months of the closing, the LumiraDx common shares closes at $15.00 per share (or higher) for any twenty (20) days within any thirty (30) consecutive trading days. In the event that a Vesting Condition is not satisfied the relevant Entitlement to LumiraDx common shares shall lapse.

TRANSACTION

The transaction implies an equity valuation at closing for the combined company of in excess of $5.0 billion. All current LumiraDx shareholders will retain the entirety of their existing holdings in the combined company. The additional capital from the CACH’s cash held in trust, after any redemptions, together with the new financing commitments and cash from operations will provide growth capital to support increasing production, continued R&D activities and commercial and manufacturing expansion.

Upon closing of the transaction, LumiraDx and its common shares are expected to trade on Nasdaq under the ticker symbol “LMDX.” The transaction is currently expected to close late Q2, early Q3 this year, subject to approval by the securityholders of each of CAHC and LumiraDx and satisfaction of customary closing conditions.

PIPE

  • None

DEBT FINANCING

  • BioPharma Credit PLC and its subsidiaries provided a $300 million loan to LumiraDx
  • Capital One, National Association has provided a commitment letter for up to $100 million on an asset-based revolving credit facility

NOTABLE CONDITIONS TO CLOSING

  • After giving effect to the exercise of redemption rights by any CAH stockholders, funds in the CAH trust account must equal at least $65,000,000

NOTABLE CONDITIONS TO TERMINATION

  • Either party may terminate if the Merger has not been consummated on or prior to September 30, 2021

SUPPORT AGREEMENTS

  • CAH and LumiraDx shareholders agree to vote in favor of the business combination
  • CAH sponsor agreed to exchange the 4,050,000 CAH private placement warrants issued to it at the time of the CAH IPO for 405,000 common shares of LumiraDx
  • In the event that a certain percentage of the CAH public shares are redeemed, the CAH sponsor agreed to forfeit a corresponding percentage of the CAH founder shares that would have otherwise converted into common shares of LumiraDx

AMENDMENT TO SPONSOR AGREEMENT

  • Pursuant to the Sponsor Agreement Amendment, the parties thereto further agreed that:
    • (i) if more than fifty percent (50%) of CAH’s Class A Common Stock sold in CAH’s initial public offering is redeemed, then an equal percentage of the CAH sponsor’s founder shares that would have otherwise converted into LumiraDx common shares will be forfeited, and
    • (ii) if fifty percent (50%) or less of CAH’s Class A Common Stock sold in CAH’s initial public offering is redeemed, then the CAH sponsor shall retain its entitlement to one hundred percent (100%) of its CAH founder shares and common shares, subject to the following vesting conditions (the “Vesting Conditions”):
      • (A) 60% of the Entitlement to the LumiraDx common shares will vest at closing,
      • (B) 20% of the Entitlement to the LumiraDx common shares will vest if at any time within eighteen (18) months of the closing, the LumiraDx common shares closes at $12.50 per share (or higher) for any twenty (20) days within any thirty (30) consecutive trading days, and
      • (C) 20% of the Entitlement to the LumiraDx common shares will vest if at any time within thirty-six (36) months of the closing, the LumiraDx common shares closes at $15.00 per share (or higher) for any twenty (20) days within any thirty (30) consecutive trading days. In the event that a Vesting Condition is not satisfied the relevant Entitlement to LumiraDx common shares shall lapse.

LOCK-UP

  • Sponsor agrees to restrict sales of shares until:
    • One year after the completion of CAH’s initial Business Combination
    • If the last reported sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after CAH’s initial Business Combination

ADVISORS

  • Evercore, Inc. and Raymond James & Associates, Inc. are serving as financial advisors to LumiraDx
  • BTIG, LLC is serving as financial advisor and capital markets advisor to CA Healthcare Acquisition Corp
  • Fried, Frank, Harris, Shriver & Jacobson LLP and Goodwin Procter LLP are serving as legal advisors to LumiraDx
  • Sidley Austin LLP is serving as legal advisor to CA Healthcare Acquisition Corp

MANAGEMENT & BOARD

Executive Officers

Larry J. Neiterman, 62
Chairman and Chief Executive Officer

From 2010 to May 2020, Mr. Neiterman was the Chief Operating Officer of the U.S. consulting practice of Deloitte Consulting LLP, a global consulting firm. From 1982 to 2009, he held various roles at Deloitte, focusing on strategic planning, mergers and merger integration, and operations consulting in the businesses of health insurance, healthcare providers and life sciences. Mr. Neiterman’s consulting work at Deloitte includes targeting and integrating significant acquisitions and joint ventures for clients. In his various leadership roles at Deloitte, he was a member of the executive team that completed acquisitions and joint ventures that enhanced the firm’s market position and had responsibility for the firm’s overall financial and operational performance. Mr. Neiterman graduated from Brown University with a BA in Economics and Organizational Behavior. He then earned his MBA in Finance and Strategic Planning from the Tuck School of Business at Dartmouth College.

Jeffrey H. Barnes, 59
President and Chief Financial Officer and Director

Since June 2019, Mr. Barnes runs a consultant practice, providing client with strategic guidance and market knowledge in the healthcare market. From April 2018 to May 2019, Mr. Barnes was Chief Executive Officer of Philips Canada, the Canadian subsidiary of Royal Philips, a global healthcare technology firm. From November 2014 to April 2018, Mr. Barnes was a Senior Vice President and North American Commercial Leader of Philips Healthcare. From August 2011 to November 2014, Mr. Barnes led Philips’s Home Healthcare business in North and South America. From May 2006 to August 2011, Mr. Barnes was an Executive Vice President of Global Commercial Operations for iCAD, a medical technology firm. Mr. Barnes is currently a board advisor for Luxsonic Technologies and was formerly a member of the board of directors at Philips Medical Capital and Virtual Incubation Companies. Mr. Barnes received his BA in Economics, cum laude, from St. Lawrence University and later earned his MBA from New York University’s Stern School of Business.

Board of Directors

David Lang, 54
Director

Mr. Lang is a private equity investor who specializes in healthcare services, healthcare technology and software/services sectors. He began his career as a financial analyst at Merrill Lynch, then moved to TA Associates as a software associate in 1990. Mr. Lang spent 25 years at TA Associates in various roles, including Managing Director in its healthcare team. At TA Associates, Mr. Lang led investments in numerous companies, including One Call Medical, TARGUSinfo, American Access Care, Alma Lasers, Intercontinental Exchange, National Imaging Associates, MQ Associates, Medsolutions/Evicore and Lawson Software. Mr. Lang is Chairman of the Board of Lahey Hospital and Medical Clinic, Director at Connected Home Care, American Endovascular, Alumni Ventures Group, Clearview Dermatology, Noble Rock Acquisition Corporation, Lexington Medical, Earthwatch Institute, and Community Action Partners. Mr. Lang graduated from Harvard College in 1989 and Harvard Business School in 1995.

David H. Klein, 72
Director

Mr. Klein is a corporate director and advisor to companies in the healthcare industry. Mr. Klein was most recently the Chief Executive Officer of the Lifetime Healthcare companies (Lifetime), a multi-billion-dollar diversified healthcare company with health insurance and health care delivery operations. He currently serves as director of the not-for-profit publicly funded New York eHealth Collaborative, not-for-profit Massachusetts-based Commonwealth Care Alliance health plan, Landmark Health, Avalon Healthcare Solutions, Cogito, NextHealth Technologies, CTG, and Transparent Health Marketplace. From 2003 to 2012, Mr. Klein was the Chief Executive Officer of The Lifetime Healthcare Companies, a diversified healthcare company with health insurance and health care delivery operations (“Lifetime”). Mr. Klein had been a senior executive with Lifetime and its predecessor companies since 1986. Mr. Klein received his Bachelor of Science from Rensselaer Polytechnic Institute and his Master of Business Administration from the University of Chicago.

Afsaneh Naimollah, 63
Director

Since October 2017, Ms. Naimollah has been an Executive-in-Residence at Plug & Play Tech Center (“PnP”), an early-stage venture capital and corporate innovation platform where she selectively mentors healthcare and technology companies on their business strategy. Since July 2016, Ms. Naimollah has been the managing partner of XEN Partners, a corporate advisory and investment banking firm focused on the healthcare industry. From October 2009 to June 2016, she was a partner and head of healthcare investment banking at Marlin & Associates, an investment banking and strategic advisory firm. From February 2000 to October 2009, Ms. Naimollah served as managing partner of Chela Capital Partners, an investment banking firm focused on healthcare and technology industries. From 1984 to January 2000, Ms. Naimollah worked at Barclays Capital’s U.S. Energy Group and later its U.S. Technologies Group, and assumed various leadership roles, including as Global Head of the latter group. From 2005 to 2010, Ms. Naimollah served on the board of ON2 Technologies, a video technology firm that was acquired by Google. Ms. Naimollah received her MBA in International Finance from University of Wisconsin, Madison and her BA in Economics and Philosophy from Milton College.

 

ByMatt Cianci