Atlantic Coastal II (NASDAQ:ACAB) signed a term sheet to enter into a definitive business combination with drug developer Abpro at a valuation of $725 million.

Woburn, Massachusetts-based Abpro is advancing a series of drug candidates to potentially treat COVID, cancer and diabetic blindness.

The combined company is expected to trade on the Nasdaq once the deal is completed in the second quarter of 2024.

Transaction Overview

Atlantic Coastal II has about $35.7 million in its current trust after seeing about 88.5% of shares redeemed in an April extension vote that allowed it to extend up to December 18.

The parties have not yet released their merger documents or an investor presentation, but Atlantic Coastal II’s profile page will be updated once additional information is made available.

Quick Takes: Biotech companies targeted by SPACs frequently do not have clear revenue roadmaps in hand when they make their deals.

This is understandable, as many still have years of clinical steps to get through before they can get their innovations out of the laboratory. Abpro has managed to secure answers to may of these questions in advance, however.

On the same day it announced this business combination, it also finalized its strategic partnership with Celltrion (KSE:068270), which could be worth up to $1.75 billion in milestone payments.

As a part of the relationship, Celltrion will take charge in developing Abpro’s ABP-102 drug candidate after it finishes in vitro studies. From then on it will have full worldwide commercialization rights, but will pass on the milestone payments to Abpro as the treatment hits certain goals.

ABP-102 has the potential to treat HER2+ cancer by using t-cell engager technology to fight breast, gastric and pancreatic cancers. The HER2+ cancer type makes up about 30% of each of these cancer cases.

The candidate is still at preclinical stages, according to its website, but Abpro has run four other clinical processes with sister drugs, each studying the efficacy of similar formulations in treating cancers in just one or another portion of the body. The data from these studies were apparently enough for Celltrion to put its chips on ABP-102 as being the best of the group.

Celltrion said it believes ABP-102’s molecule has shown better efficacy and less toxicity compared to other therapies treating the same indication and it has the potential to be the best-in-class treatment for the HER2+ cancer group.

In addition to the commitment for milestone payments, Celltrion made an equity investment in Abpro of unspecified size, so the two are likely to be bound together for some time.

That’s not the only iron that Abpro has in the fire, however.

It is preparing an Investigational New Drug (IND) application for its ABP-201 drug candidate that uses antibodies to treat Wet AMD/Diabetic macular edemas, which can cause blindness.

The company also made it to Phase II studies with its DiversImmune treatment platform that has used monoclonal antibody therapies to fight COVID. It was found to be effective against the Omicron variant and was nearing approval with a fast-tracked status in the EU in 2021.

Unlike some other biotech firms that made gains with the special status for candidates in fighting COVID, but now find themselves in a crunch as attention and capital have gone elsewhere, Abpro appears that it could afford to walk away from this division and still have plenty on its plate.

Nonetheless, its continued partnership with Celltrion may give the opportunity to explore all avenues. Celltrion’s own portfolio is diversified across treatments for cancer and arthritis as well as monoclonal treatments designed to treat COVID and other ailments.

All of that said, investors will likely be eager to get their hands on more information given the deal’s size. Assuming the transaction’s cited valuation at $725 million is close to its pro forma enterprise value, this would be the 7th-largest among the 41 biotech deals announced since January 1, 2022.

Only one other deal in this sector has been announced so far in 2023 with an enterprise value above $480 million — Semper Paratus’ (NASDAQ:LGST) pending $1.2 billion tie-up with Tevogen Bio.

ADVISORS

• • Company:
    • Brookline Capital Markets, a Division of Arcadia Securities, LLC, acted as a financial advisor
  • SPAC:
    • None disclosed at this time