The Rundown (7/21/21)
Creating a New Market
On 22nd June, SAB Biotherapeutics announced its merger with SPAC Big Cypress Acquisition Corp valuing the combined company at $325 million and providing the company with around $118 million in cash. The merger is expected to close in the fourth quarter this year with the company being listed on Nasdaq.SAB is a clinical stage biopharmaceutical company which produces a high potency, polyclonal antibodies at scale.
We got a chance to sit down with Dr Eddie Sullivan, CEO of SAB Biotherapeutics and Sam Reich, CEO of Big Cypress Acquisition Corp, to talk about SAB’s innovative technology, SPAC mergers and the pandemic.
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subspac: Congratulations to Big Cypress on closing the deal with SAB. First off, when the deal was announced, you said that Big Cypress looked at over 60 companies before determining that SAB would be the perfect fit for a merger. So what were the factors that made you believe SAB was the right one?
Sam Reich: Thank you. So first off, I’m a I’m a molecular biologist by training, and I have a patent family of inventions that lead to a portfolio of RNA therapeutics, in fact the first RNA therapeutics was 20 years ago. I have built two biotech companies from the ground up. One from my inventions, which was called Acuity pharmaceuticals, which was renamed OPKO in a merger. The second was from a neurologist at Harvard. We took a drug that he had invented for a seizure disorder and developed that drug and built and sold it to a public pharmaceutical company in 2018. So I assembled a team of entrepreneurs in in biotech and started Big Cypress. We went public in January with a $150 million IPO and began looking at companies and talking to CEOs and management teams in January. We were very fortunate to come across SAB after we had many detailed discussions with a dozen or more companies that passed out first round of metrics. What stands out the most about SAB is that they have a one of a kind, totally unique technology.
So one of the things I’ve heard since we started this was about a moat. They have moats surrounded by moats and there is no way anyone else in the world that could do what SAB does. It would take a generation for a competitor to compete with this. So Eddie just explained about the advantages of Polyclonal antibodies and there are several advantages. Well, it just so happens that SAB is the only company in the world that can develop pharmaceutical antibodies without the use of human donors. SAB has a proprietary platform in which they manufacture polyclonal antibodies for anything they want. Once the Capital markets recognize the capabilities and potential of polyclonal antibodies, which we think will be over the next several months, the potential for value creation is tremendous. And the lifetime of exclusivity is in perpetuity. While every other biotech company is pretty much one drug and that drugs patent will run out in 20 years. The limit to value creation is limited to the market size and the ability to compete in the market.
Whereas SAB owns an entire therapeutic modality, which is exclusive in perpetuity because of trade secrets, which are much more valuable than patents. So the potential for growth can’t be compared. Now, there are other biotech companies with proprietary platforms that happen to go out with multi billion dollar valuations. But we don’t know if those are going to work. With SAB, we have enough data, we are highly confident in the management team and can make a safe bet that this is going to work. So not only are we bringing this really exciting technology that’s been validated, if you look at other comparable firms in biotech, we’re bringing an asset to the capital markets that presents a tremendous opportunity and tremendous upside.
subspac: Since you suggested that the tentative completion date for the SPAC merger is around Q4, can you just elaborate a little about the strategy to complete the merger in the next few months?
Sam Reich: So we hope to be able to close the deal in in early Q4, hopefully, and we we’re introducing the opportunity to people like yourselves. More importantly, we are also making sure that the fundamentals of the company are strong. So one thing I’ve said is that, this company stands on its own legs and the capital markets will appreciate the value and the company will grow on day one. But in the meantime, between now and when we close, we hope to introduce SAB to investors and journalists so that they appreciate the value.
When we entered into this merger, everybody thought that the vaccines were going to cure Covid-19 and we agreed on both sides. Well, Covid is a great way to validate polyclonal antibodies and now were seeing a tremendous need that continues in Covid. I think that SAB offers a solution that is potentially world saving. As the virus mutates and new variants come up, I’m sure the United States government is all over it and thus therapeutic should be effective as the virus mutates.
And then there’s the future. So that’s very timely, right? What we are doing now is we have a therapeutic that should address all the different variants in all the populations that aren’t getting vaccinated or populations that are vaccinated but don’t show an immune response. So as we bring SAB to the market, the market knows that it’s coming, knows the story that there’s great immediate near term growth, long term growth. People are going to buy the stock and hold it knowing that there’s going to be a lot of value creation over the next few months and then over the next few years.
subspac: Okay, so a follow up question to both of you. Generally speaking with biotechnology companies, there are considerable risks, considering the high cost of development and the regulatory challenges and the probabilities of success when you move on from one clinical stage to the next. So how is the company looking to alleviate the risk? And what is your diversification strategy to make sure that you have a winner on your hands?
Eddie Sullivan: We’ll, Sam mentioned that in Big Cypresses evaluation, they recognized that SAB’s business strategy was not one product or a two product company. And on top of that, we are not just an infectious disease company. Infectious disease is is one of the indications that is part of the Proving Grounds of our platform technology. We recognize the unique opportunity that the polyclonal antibodies have in being able to respond to infectious diseases, emerging diseases and pandemics. So the risks associated with any particular product are mitigated by having a whole opportunity of multiple products moving forward. And that’s exactly how we mitigate the obvious risks that always exist in the development of any single product.
Sam Reich: So from our point of view, we were evaluating biotech companies for three, four months before we were fortunate enough to be introduced SAB. Usually it’s a molecule and a SPAC getting involved after that molecule has been proved safe. But these SPAC mergers are before they are proved efficacious. So you be got this risk that it just wont work. Everybody looks to the management team, and the quality of the team to trust them looks to the science exhibited the data, to say, it’s a fair bet, and we’ll take that risk and that’s the industry of biotech.
There was absolutely no question in my mind that SAB presents the lowest risk. There’s a couple of reasons for that. One, human polyclonal antibodies are drugs that come from human plasma donors. So we known Polyclonal antibodies work. Two monoclonal antibodies are a $150 billion market that works. With monoclonal market, we don’t know if the target is a target that’s important for a disease. With polyclonal antibodies, we have enough information to know and have tremendous confidence that this platform will eventually be a drug portfolio. Additionally, in terms of risk, because SAB owns a platform, there is partnering opportunities for revenue. SAB could standalone as a partner with a big Pharma to develop new drugs.
SAB also has contracts with the United States government, which has an incredibly rigorous due diligence process and has total faith in SAB as demonstrated by large contracts. So SAB is a phase two company technically when you look at it, but it’s a phase two company with the lowest risk of any other phase two company, because of the platform that it owns, and how it’s been validated. So SAB can make polyclonal antibodies that nobody else can make, there are partnering opportunities which have already been validated, undisclosed partnerships that are already interested in working with SAB to develop new drugs and the United States government contracts, which are already in place. So I think no other opportunity can compare to the risk mitigation.
subspac: So just one final question to follow up on that. You said that the monoclonal market was about $150 Billion. If you could estimate a potential market, how big would you say was the polyclonal antibody market and how big could it be, say five years from now?
Eddie Sullivan: Well, I mean, it’s always speculation, how big markets can be. What I can tell is that, the current polyclonal antibody market is a fraction of what the monoclonal antibody market is. But we represent a technology that has the opportunity and all of the parts in place to create a significant impact in the growth of the overall immunotherapy. We think that you know, this has significant growth opportunities and obviously, will impact that overall market in the significant way. This is a product generation engine, where we are not just producing a COVID product or an influenza product or or, you know, a immune disorder product but rather multiple products will be will continue to be pushed forward as we go. And then Sam has mentioned that not only not only in that commercial market, but also in the potential for partnering with multinational pharmaceutical and biopharmaceutical companies and in what we’re doing with the US government contracts as well.
Sam Reich: I smiled when you asked that question, which is an excellent question. I mean, what would Genentech have answered in 2002, if you asked them, What do you think the global monoclonal antibody market going to. Or your know, what is the recombinant DNA market going to be. We’re making a market and that’s where the most opportunities lie. If you had asked Steve Jobs, how many people are going to buy an iPhone, Nobody would have had the answer to that question.