The French startup creator eureKARE has set up a special purposes acquisition company (SPAC) with the ambition to merge multiple European contract development and manufacturing organizations into a heavyweight serving developers of gene therapies, protein drugs, and microbiome therapeutics.
Over the last few years, record levels of funding have flowed into the biotech industry, particularly to players developing gene and cell therapies. This has been echoed by a skyrocketing demand for contract development and manufacturing organizations (CDMOs) that can handle the production of complex biological products such as protein drugs and cell therapies.
The biotech CDMO market is dominated by five major players: Lonza, Boehringer Ingelheim, WuXi Biologics, Catalent, and Samsung Biologics. However, the big five focus primarily on manufacturing on large scales, which doesn’t suit small biotechs testing their cell and gene therapies in early-stage clinical trials.
The French startup creator eureKARE aims to fill in the manufacturing needs of small biotechs across their clinical development pipeline. The firm has set up eureKING, a special purposes acquisition company, or SPAC, that plans to absorb three European CDMOs into one entity and compete with the leading CDMO giants.
“There is a gap for a mid-size, highly specialist player that can meet the needs of young and established biotechnology companies who are often overlooked by the larger CDMOs as they don’t represent big customers,” said Michael Kloss, CEO and co-founder of eureKING.
While there are many smaller CDMO alternatives for biotech companies to choose from, Kloss noted that very small manufacturers often have a hard time meeting regulatory requirements due to lack of staff or technical equipment and typically focus on making a few specific drugs.
In the SPAC acquisition process, eureKING would take the acquired CDMOs public without them undergoing a traditional initial public offering (IPO), which is more vulnerable to the difficult market conditions currently afflicting the biotech space. Nonetheless, eureKING itself braved the stormy public markets to finance the acquisitions; the firm closed a €150M IPO on Euronext Paris this week.
“We are very different to other SPACs that are being seen,” said Kloss. “We have a very experienced team and we’re focused on a specialized industry which is ripe for disruption and with a clear demand and need for investment.”
Until this year, the biotech scene in the US had been in a hot period for SPAC acquisitions. In Europe, however, biotech SPACs have remained relatively rare, with a SPAC launched by the venture capital firm Forbion last year being one example.
“Currently, the majority of SPACs are in the US, which is a mature market for this kind of product,” explained Kloss. “There is a strong appetite for a SPAC in Europe: it would provide European investors with a more stable transaction in this volatile market environment, as its structure offers more deal certainty and less execution risk than an IPO.”
eureKING’s criteria for acquisition candidates include long-term growth potential, diversified platforms, and a valuation of between €200M and €500M. The three specific manufacturing segments in focus are protein drugs including antibodies; cell and gene therapies; and microbiome therapeutics, for example, live microbes delivered to a patient’s gut to improve gastrointestinal health. The SPAC has already entered acquisition negotiations with an unnamed CDMO.
When planning the manufacturing process for gene and cell therapies, startups usually have to weigh up producing with a CDMO or in-house. Many biotechs that opt for in-house are those producing live microbiome therapeutics, which often require specific technology that isn’t commonly offered by CDMOs. eureKING aims to bridge this gap by becoming a leading CDMO in the European microbiome space.
Though investor interest in cell and gene therapies is growing fast, the manufacturing of these treatments remains tricky to pull off on a grand scale. Big pharma firms and CDMOs typically churn out these therapies in a centralized approach, which often leads to complicated logistics and patients waiting a long time to receive cell therapies. A growing movement is calling for gene and cell therapy manufacturing to take place in smaller, decentralized locations, and eureKING is aiming to contribute to this shift.
The transition to a more decentralized model of manufacturing will require fewer manual procedures, a growth in automation, and increases in yield. A number of European startups have raised big rounds to push in this direction, including Ori Biotech, bit.bio, and Treefrog Therapeutics.
12 May: Article updated with results of eureKING’s IPO.
Cover image via Shutterstock.