Seattle startup creating therapies primarily based on human milk to go public through SPAC merger

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Intrinsic Medicine CEO Alex Martinez. (Intrinsic Medicine Photo)

Seattle startup Intrinsic Medicine plans to go public through a merger with a shell company, Phoenix Biotech Acquisition Corp. The four-year old biotech startup is developing potential therapeutic compounds matching molecules found in human milk.

The deal is expected to raise $178.8 million through the special purpose acquisition company, known as a SPAC. The parties also will seek funding through a private placement, a financial mechanism that could lead to additional cash.

The combined company will be called Intrinsic Medicine and will be led by Intrinsic CEO and co-founder Alex Martinez and co-founder Jason Ferrone, its president and chief operating officer.  

Intrinsic Medicine had previously filed to go public via a traditional IPO, but withdrew its filing in July.

Human milk oligosaccharides, sugar-based molecules, are thought to help modulate the immune system and affect the collection of microbes in the intestine. Some research suggests they may also affect neurological functioning.

The company has preclinical programs developing synthetic milk oligosaccharides for atopic dermatitis, autism spectrum disorder, rheumatoid arthritis and other conditions. The new funding will support the company’s plans to initiate a phase 2 clinical trial for patients with irritable bowel syndrome.

“With this commitment from PBAX, we will challenge the status quo to deliver a differentiated class of microbiome and immune-modulating medicines with the potential to provide true relief to individuals suffering from GBA disorders,” said Martinez in a statement Monday announcing the deal, referring to the gut-brain axis. Top-line data from the phase 2 trial are expected in the first half of 2024.

The deal values Intrinsic Medicine at $136 million, according to a press release. PBAX shareholders must approve the deal, which is expected to close in the first half of next year. The combined company is expected to trade on the Nasdaq under the symbol INRX.

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“After evaluating nearly 100 biotech companies, Intrinsic emerged as the standout choice for our business combination,” said PBAX CEO and director Chris Ehrlich in a statement. Ehrlich is a former senior managing director of pharmaceutical investing firm Locust Walk Partners, and previously served as CEO of a Locust Walk SPAC that merged with eFFECTOR Therapeutics last year.

Ehrlich controlled 100% of Phoenix’s stock prior to its IPO last year; institutional shareholders now own about 79% of the shell company.

Also known as blank check companies, SPACs re-emerged in a big way during the pandemic as capital flowed to newly formed entities and entrepreneurs who used SPACs to more quickly enter the public markets.

But the performance of post-merger SPACs has steadily dropped, particularly since January amid the larger market downturn, and more deals are getting spiked. CNBC earlier this year called the SPAC market oversaturated.

The four Seattle companies that went public via a SPAC last year, including protein analysis company Nautilus Biotechnology, have seen their share prices sputter amid the broader economic downturn.

The merger also comes amid an overall rapid cooldown in public offerings. According to Endpoints News’ IPO tracker, 147 biotech companies went public in 2021; 48 of those were SPAC mergers. So far this year, only 25 biotech companies have gone public, 12 via a SPAC merger.

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