Shopping Cart

Social Capital Suvretta Holdings Corp. III

Social Capital Suvretta Holdings Corp. III

Jun 2, 2021 by Anthony Sozzi

PROPOSED BUSINESS COMBINATION: ProKidney LP

ENTERPRISE VALUE: $1.835 billion
ANTICIPATED SYMBOL: PROK

Social Capital Suvretta Holdings Corp. III proposes to combine with ProKidney LP, a leading clinical-stage cellular therapeutics company focused on chronic kidney disease (“CKD”).

ProKidney’s lead product candidate, REACT® (Renal Autologous Cell Therapy), has the potential to not only slow the progression of CKD, but in some cases drive meaningful improvement in kidney function – a groundbreaking first in CKD therapies.

A cell therapy product produced from a patient’s own kidney cells, REACT® comprises a proprietary mixture of progenitor cells that have been grown and purified, so they can be placed back into the patient’s kidney. This minimally invasive procedure, starting with a standard biopsy, provides the cells that harness the body’s intrinsic ability to repair and restore damaged kidney tissue. The reinjection procedure has been shown to be safer than contemporary biopsy and renal failure treatment options, such as dialysis and organ transplant.

  • 75 million CKD patients in the United States and the European Union.
  • CKD patient population in the United States and the European Union is projected to grow by 22% between 2020 and 2040, in part due to the escalating prevalence of diabetes, obesity, and heart disease.
  • Initial REACT® target market: 4-5 million diabetic patients with CKD stages 3a, 3b, and 4 at very high risk of renal failure with severe albuminuria and eGFR’s between 20-50 ml/min/1.73m2 in the United States.
    • With the potential to delay or prevent ESRD, REACT® has the potential to drive significant cost savings over the long term.
    • Today, ESRD patients remain on dialysis for 5-10 years on average, which costs an average of $93,000 per patient per year, with Medicare (and up to 4x more for private insurers).
  • By improving patients’ quality of life, the treatment may also reduce the use of medication.
  • Over time, and subject to receipt of regulatory approvals, ProKidney intends to expand to the European Union and additional markets, including China, Japan, Korea, the Middle East, Latin America, Australia, and New Zealand, as well as into additional indications, including congenital anomalies of the kidney, polycystic kidney disease, and other genetically based kidney diseases.

Initial Clinical Results and Path to Commercialization for REACT®:

  • Promising interim data from Phase 2 clinical trial in diabetic patients with CKD stages 3a, 3b, and 4 (moderate-to-severe kidney disease):
    • Majority of patients achieved disease stabilization or improved kidney function.
    • Improvement in kidney function significantly reduces risk of ESRD or need for kidney transplant.
  • Phase 3 clinical trial launch:
    • As a result of its performance in Phase 1 and 2 trials, ProKidney’s REACT® has received Regenerative Medicine Advanced Therapy (“RMAT”) designation, allowing for ongoing and regular interaction with regulators during the Phase 3 program.
    • The Phase 3 program, initiated in January 2022, may enroll up to 1,500 participants with primary analysis projected to occur in 2025.

TRANSACTION

  • The transaction is expected to deliver up to $825 million in gross cash proceeds, including the contribution of up to $250 million of cash held in SCS’s trust account, assuming no redemptions by SCS public shareholders, and a fully committed PIPE of $575 million at $10 per share.
  • These proceeds will be primarily used to fund REACT®’s Phase 3 development program, accelerate ProKidney’s manufacturing buildout, and ultimately prepare for the global commercial launch of REACT®.
  • The PIPE is led by a $125 million contribution from Social Capital, with an additional $50 million from ProKidney’s existing investors, approximately $30 million from Suvretta Capital’s Averill strategy with the remaining $370 million coming from institutional investors and family offices.
  • Existing ProKidney equity holders will roll 100% of their equity into the combined company and will be eligible to receive up to 17.5 million additional SCS shares pursuant to an earnout based on ProKidney’s future stock performance.
  • Existing ProKidney shareholders and management have also committed to lock up 50% of their equity interests until the earlier of five years or regulatory market authorization, including full or conditional authorization, to market its lead product candidate, REACT®, subject to certain customary exceptions.

DNAC Transaction Overview

PIPE

  • An aggregate of 57,500,000 shares of SCS Class A Common Stock for an aggregate purchase price of $575,000,000 (the “PIPE Investment”), of which:
    • (i) approximately $155 million is committed by certain existing directors, officers and equityholders of SCS, SCS Sponsor III LLC, a Cayman Islands limited liability company and the sponsor of SCS (the “Sponsor”), and/or their respective affiliates, and
    • (ii) at least $50 million (which may, at the election of such investors, be increased to up to $100 million) is committed by certain existing directors, officers, and equityholders of ProKidney and/or its affiliates.
    • (iii) the remaining $370 million coming from institutional investors and family offices.
  • The PIPE Investment will be consummated prior to or substantially concurrently with the Closing.
  • The ProKidney Related PIPE Investors may, pursuant to the applicable Subscription Agreements, purchase ProKidney Common Units (together with a corresponding number of shares of SCS Class B Common Stock, if applicable) in lieu of shares of SCS Class A Common Stock, at the same purchase price.

LOCK-UP

  • The Lock-Up Agreement – Sponsor and Company:
  • Such restrictions begin at the Closing and end on the earlier of:
    • (i) the date that is 180 days after the Closing and
      • (a) for 33% of the Lock-up Shares (other than the Earnout Shares and the Sponsor Private Placement Shares, the date on which the last reported sale price of SCS Class A Common Stock equals or exceeds $12.50 per share for any 20 trading days within any 30-trading day period commencing at least 30 days after the Closing and;
      • (b) for an additional 50% of the Lock-up Shares (other than the Earnout Shares and the Sponsor Private Placement Shares), the date on which the last reported sale price of SCS Class A Common Stock equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period commencing at least 30 days after the Closing.
  • Notwithstanding the above,
    • (i) the lock-up period for any Earnout Shares will expire not earlier than 180 days after such Earnout Shares are issued;
    • (ii) 50% of the Lock-up Shares held by certain ProKidney unitholders and their affiliates will remain locked up until the earlier of four years following the Closing and the date that ProKidney receives notice of any regulatory market authorization, including full or conditional authorization, to market its lead product candidate, Renal Autologous Cell Therapy (but, in any event, not earlier than 180 days following the Closing or (in the case of Earnout Shares) the date of issuance); and
    • (iii) the lock-up period for the shares of SCS Class A Common Stock that were issued to the Sponsor in a private placement concurrently with SCS’s initial public offering (the “Sponsor Private Placement Shares”) will expire 30 days after the Closing.

EARNOUT

  • Existing unitholders of ProKidney will receive an aggregate of 17,500,000 restricted common units of ProKidney and 17,500,000 restricted stock rights in respect of shares of SCS Class B Common Stock, which Earnout Rights will vest in three equal tranches upon the trading price of a share of SCS Class A Common Stock, reaching $15.00/share, $20.00/share and $25.00/share, respectively.

NOTABLE CONDITIONS TO CLOSING

  • Amount of cash available at the Closing of at least $500,000,000.

NOTABLE CONDITIONS TO TERMINATION

  • The Business Combination Agreement may be terminated at any time prior to the Closing by either SCS or ProKidney if the Closing has not occurred on or before September 18, 2022.

ADVISORS

  • Citigroup acted as sole financial advisor and capital markets advisor to ProKidney.
  • Citigroup, Morgan Stanley, Evercore, Jefferies, and UBS acted as placement agents for a portion of the PIPE.
  • BofA Securities acted as capital markets advisor to SCS.
  • Wachtell, Lipton, Rosen & Katz acted as legal advisor to SCS.
  • Davis Polk & Wardwell LLP and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C acted as legal advisors to ProKidney.
  • Winston & Strawn LLP is serving as legal advisor to the PIPE placement agents.

MANAGEMENT & BOARD

Executive Officers

Chamath Palihapitiya, 44
Chief Executive Officer and Chairman of the Board of Directors

Mr. Palihapitiya founded Social Capital in 2011 and has been its Managing Partner since its inception. Mr. Palihapitiya also serves as the Chief Executive Officer and the Chairman of the board of directors of DNAB, DNAC and DNAD. In addition, Mr. Palihapitiya currently serves as the Chief Executive Officer and the Chairman of the board of directors of each of the Hedosophia SPACs . Mr. Palihapitiya previously served as the Chief Executive Officer and the Chairman of the board of directors of Social Capital Hedosophia Holdings Corp. from May 2017 until the consummation of its business combination with Virgin Galactic in October 2019, and continues to serve as the Chairman of the board of directors of Virgin Galactic. Mr. Palihapitiya also previously served as the Chief Executive Officer and the Chairman of the board of directors of Social Capital Hedosophia Holdings Corp. II until the consummation of its business combination with Opendoor Labs Inc. in December 2020 and as the Chief Executive Officer and the Chairman of the board of directors of Social Capital Hedosophia Holdings Corp. III until the consummation of its business combination with Clover Health Investments, Corp. in January 2021. Mr. Palihapitiya also served as a director of Slack Technologies Inc. from April 2014 until October 2019. Prior to founding Social Capital in 2011, Mr. Palihapitiya served as Vice President of User Growth at Facebook, and is recognized as having been a major force in its launch and growth. Mr. Palihapitiya was responsible for overseeing Monetization Products and Facebook Platform, both of which were key factors driving the increase in Facebook’s user base to more than 750 million individuals worldwide. Prior to working for Facebook, Mr. Palihapitiya was a principal at the Mayfield Fund, one of the United States’ oldest venture firms, before which he headed the instant messaging division at AOL. Mr. Palihapitiya graduated from the University of Waterloo, Canada with a degree in electrical engineering.

Kishan (a/k/a Kishen) Mehta, 35
President and Director

Mr. Mehta also serves as the President and a member of the board of directors of DNAB, DNAC and DNAD. Prior to joining Suvretta as Portfolio Manager for the Averill strategy, Mr. Mehta served as a strategic advisor to Biohaven , where he advised the company on various business development, capital structure and communication strategies, including a $300 million secondary public offering and the $105 million purchase of a Priority Review Voucher from GW Pharmaceuticals plc, which included $200 million in financing from Royalty Pharma plc to fund the transaction. Prior to his advisory role at Biohaven, Mr. Mehta was a portfolio manager at Surveyor Capital, a Citadel LLC strategy, where he managed a portfolio focused on global small-, mid- and large-capitalization biotechnology, pharmaceutical, specialty pharmaceutical, medical device and healthcare services. Prior to Surveyor, Mr. Mehta was an analyst at Adage Capital where he evaluated and participated in numerous mezzanine and pre-IPO private healthcare investments. Mr. Mehta held a similar role at Apothecary Capital and started his career as a mergers and acquisitions analyst at Evercore Partners, where he focused on life sciences. Mr. Mehta graduated from New York University with a degree in finance and accounting.

James Ryans, 45
Chief Financial Officer

Mr. Ryans also serves as the Chief Financial Officer of DNAB, DNAC, DNAD, Social Capital Hedosophia Holdings Corp. IV and Social Capital Hedosophia Holdings Corp. VI. Mr. Ryans is a Partner at Social Capital since March 2021, and has been a professor of accounting at London Business School since 2016, teaching financial accounting at the graduate and postgraduate levels, and directs an executive education program on mergers and acquisitions. Mr. Ryans previously served as a member of the board of directors of Social Capital Hedosophia Holdings Corp. III from April 2020 until the consummation of its business combination with Clover Health Investments, Corp. in January 2021, as a director and the chairman of the audit committee of Social Capital Hedosophia Holdings Corp. from September 2017 until the consummation of its business combination with Virgin Galactic in October 2019, and as a member of Virgin Galactic’s board of directors through February 2021. From 2003 to 2011, Mr. Ryans oversaw investments and business development at Chelsea Rhone LLC and its affiliate HealthCap RRG, a mutual insurance company. From 1999 until 2001, Mr. Ryans was a consultant with Deloitte & Touche. Mr. Ryans is a CFA charterholder and holds a Ph.D. in business administration from the University of California Berkeley, an MBA from the University of Michigan and a BASc in electrical engineering from the University of Waterloo.

Board of Directors

Shoney Katz, 46
Director of Research

Mr. Katz also serves as the Director of Research of DNAB, DNAC and DNAD. Mr. Katz is a Managing Director and Senior Analyst at Suvretta, with extensive experience investing in public and private markets. Prior to joining Suvretta, Mr. Katz worked as a Portfolio Manager at Citadel LLC’s Surveyor Capital, where he managed a portfolio of industrial, consumer and financial-related ideas. From 2008 to 2014, Mr. Katz worked as a Senior Analyst at Point72 Asset Management, focused on fundamental and opportunistic ideas across various sectors. Mr. Katz also previously held positions at private equity firms, including The Carlyle Group and AEA Investors, and in management consulting as an analyst at Bain & Company. Mr. Katz holds an MBA from Harvard Business School and a Bachelor of Science in Mechanical Engineering and a Bachelor of Arts in Economics from Rice University.

Marc Semigran, 64
Director Nominee

In June 2021, Dr. Semigran was appointed as chief medical officer of Renovacor, Inc., an early-stage biotechnology company focused on the development of therapies for cardiovascular and central nervous system diseases. Prior to joining Renovacor, Dr. Semigran was an Associate Professor of Medicine at Harvard Medical School, a position he held from January 2010-February 2017. He previously served as Chief Medical Officer of MyoKardia from December 2016 until the acquisition of MyoKardia by Bristol-Myers Squibb in 2020 for approximately $13.1 billion. Prior to MyoKardia, from April 2004 through February 2017, Dr. Semigran served as Medical Director of the Massachusetts General Hospital Heart Failure and Cardiac Transplant Program, where he was responsible for leading the overall direction of the care of heart failure patients, including with respect to cardiac transplantation. He is an active investigator in translational and clinical medicine as applied to heart failure and cardiomyopathy. His research was funded by NIH and other peer-reviewed grants, and continues with industry funding. Dr Semigran is a graduate of the Harvard/MIT Health Sciences and Technology Program and completed his internal medicine residency and cardiology fellowship training at Massachusetts General Hospital. Dr. Semigran holds an M.D. from Harvard Medical School and an AB/AM in chemistry from Harvard University.

Uma Sinha Ph.D., TBD [Appointed 9/24/21]
Independent Director

TBD

 

ByAnthony Sozzi