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February 11, 2021

Sema4 to go public in SPAC merger valuing company at $2B

Sema4 Founder and CEO Eric Schadt appeared on NBC Connecticut April 8 to discuss his company's COVID-19 testing and research.

AI-driven health intelligence company Sema4 announced Wednesday morning that it is merging with a “blank check” company and going public in a deal that values the Stamford-based startup at $2 billion.

The rapidly growing company, which also has a lab in Branford, said its merger with CM Life Sciences is expected to close during the second quarter of this year, pending approval from CM shareholders.

The combined company will be listed on the Nasdaq under a to-be-announced name and ticker symbol, Sema4 said.

CM Life Sciences is a special purpose acquisition company, or SPAC, led by health care investment firm Casdin Capital and hedge fund Corvex Management, both of which are based in New York.

A growing trend on Wall Street, SPACs are essentially shell companies set up to raise capital for the purpose of acquiring another company and taking them public, eliminating the need for an initial public offering. 

Investors in publicly-traded SPACs are not told which company is being targeted for acquisition by the SPAC, hence the nickname “blank check” company. 

Such deals have been in the news recently as a result of SPAC mergers involving high-profile startups, such as DNA-testing company 23 and Me. 

Closer to home, Guilford serial entrepreneur Jonathan Rothberg’s medical device startup Butterfly Network plans to go public later this year in a SPAC merger valuing that company at $1.5 billion.

The Sema4 deal is expected to provide up to $793 million in cash proceeds, according to the company, up to $343 million of which will be paid to Sema4 stockholders. Sema4 said it will use the remaining proceeds to continue growing the business.

CM Life Sciences will be contributing $443 million in cash. The deal also includes a PIPE (public investment of private equity) of $350 million from growth and life sciences investors such as Casdin Capital, Corvex Management, Fidelity, Morgan Stanley Perceptive, SoftBank, T Rowe, Viking and existing investors.

“The additional resources will allow us to greatly accelerate our business plans organically and inorganically, developing and bringing in more cutting edge precision model solutions across multiple disease areas,” said Sema4 CEO Eric Schadt, who will continue to lead the company along with the existing management team. (New Haven Biz named Schadt one of its 2021 Power 25 honorees earlier this month.)

Spun out of New York’s Mount Sinai Health System, Sema4 opened its Stamford headquarters in 2017 and now employs 500 people in Connecticut.

It reached “unicorn” status last August after a $121 million Series C round pushed its valuation past $1 billion.

The company uses artificial intelligence to build predictive models in the areas of women’s health and oncology. It also offers genomic health screening and modeling, and recently partnered with the state to conduct large-scale COVID-19 testing. 

“Eric has built a unique business at Sema4 with a combination of scale, growth and innovation that we rarely see,” Keith Meister, CIO of Corvex Management and board chairman for CM Life Sciences, said in a statement. 

He said the company’s revenues are expected to grow from $200 million to $500 million and its gross margins are expected to double by 2023.

Through partnerships with health care systems, Sema4 says it has collected more than 10 million de-identified genomic profiles and patient records that it analyzes to help doctors proactively diagnose and manage disease.

“The disruptive promise in combining these genomic and clinical data sets, at the patient level, is profound but takes a team of experts, the right business model and lots of growth capital,” Eli Casdin, founder and CIO of Casdin Capital, said in a statement. “We therefore could not be more excited to lend our partnership and fill the balance sheet for the foremost leader in the field, Eric Schadt and the expert team he’s assembled at Sema4.”

News of the merger follows an announcement earlier this week that Sema4 appointed former Goldman Sachs analyst Isaac Ro as chief financial officer.

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