Science 37 Blockbuster SPAC Valuation Points To Growth In Decentralized Trials

Expanding partnerships with CROs, the COVID-19 lockdown, an eager FDA and an industry desire for faster and more diverse clinical trial recruiting helped Science 37, a decentralized clinical trial company, nail down plans to go public. Science 37 CEO David Coman spoke with In Vivo about the reasons for going public via SPAC, and why decentralization is a “prerequisite to operating a clinical trial today.” 

Founded in 2014, Los Angeles-based Science 37 announced in May that it would trade on the public market through a merger with LifeSci Acquisition II Corp., a special purpose acquisition company (SPAC). The deal, which is expected to close in the third quarter, will value Science 37 at $1.05bn, and Coman said he hopes the stock price will “get to $100 in short order, and we’re going to have to earn it.” LifeSci Acquisition II Corp., the blank check or SPAC party in the deal, was priced at just over $10 at close of trade on 21 May, 2021. SPACs became an increasingly popular route to market for health care companies in 2020.  (Also see "SPACs Surge In 2020" - In Vivo, 15 Feb, 2021.)

For Science 37, the decision to go public using a SPAC rather than a traditional IPO came down to three primary reasons, said Coman. The first was speed to market, which helps “take away the distractions of the process, so we can get back to work faster,” said Coman.

Using a SPAC also allows the company to be more open about its value proposition. “We can talk about past and future results and expectations, and through the PIPE process, you are able to present the full story, and have investors pitch in, pre-IPO, to validate the market price so that you are not in a situation where you are going into the market and not knowing what the value of the company really is,” he said.

David Coman, CEO, Science 37

Seventeen investors participated in the private investment in public equity (PIPE) process, which Coman described as “very significant for us.” A third reason for going public via SPAC was that LifeSci Acquisition II Corp. was familiar with Science 37 and had participated in prior funding rounds, making it a good fit. “And the structure of the SPAC was done the right way,” said Coman. “It’s an $80m SPAC with zero public warrants, and that’s a big deal.”

Public warrants, which are often issued to investors as part of a unit (along with a common share) during an IPO, may for example allow the warrant holder to purchase additional company shares later on, at a prearranged price and timeframe. From an accounting perspective, public warrants have previously been considered as equity on a company’s balance sheet. In April, however, the US Securities and Exchange Commission (SEC) said in a Staff Statement (which is not a formal rule or regulation) that certain warrants associated with SPACs would need to be analyzed, to determine whether the warrants are properly considered as equity, or as liabilities. Determining that a public warrant is indeed a liability, not equity, could trigger additional reporting requirements, costs or penalties. Coman said the lack of public warrants made the SPAC “a lot more affordable for us and allowed us to spend more time with the PIPE build to make sure that we are getting the price properly aligned.”

CROs Adding Decentralized Capabilities

Coman, who worked as SVP, digital patient unit and chief marketing officer at Quintiles, a contract research organization (CRO), prior to its acquisition by IMS Health and subsequent formation of IQVIA, said that Science 37 sees itself as a decentralized trial enabler. “The market is shifting toward more decentralization, and the CROs really have to have a solution to address the customer need.” In addition to providing connected devices used for capturing clinical trial data or monitoring patients, Science 37’s decentralized clinical trial operating system also includes access to mobile nurses, telemedicine trial investigators, patient communities and remote coordinators, which can be used as individual service offerings or configured together, depending on the needs of an individual trial protocol.

Large CROs including PPD and Syneos Health have both recently announced partnerships with Science 37. In April, PPD (which also previously led a Science 37 series D financing round) expanded a previous two-year collaboration with the company, providing PPD with access to Science 37’s platform, which enables remote clinical trial tools including electronic clinical outcome assessment (eCOA), eConsent, eSource and “fully decentralized trials,” the companies said.

In March, Syneos announced a strategic partnership with Science 37, to enable “enhanced decentralized clinical trial delivery.” As part of the partnership, Syneos joined Science 37’s “CRO Certified” program, which provides training and commercial support to help Science 37’s CRO partners roll out decentralized trials. PPD is also a member of the CRO Certified program. Coman said Science 37 had close relationships with other CROs as well, and those were “quickly expanding.”

Pandemic Effect And Better Access

The move toward decentralization in clinical trials began long before the COVID-19 pandemic set in, but as with other virtual tools and services, such as telehealth for example, the pandemic rapidly sped up adoption. The FDA has been “quite candid about the desire to tap into [decentralized trial] capabilities, but it evolved from being keen on having companies do decentralization, to becoming a mandate during the pandemic,” said Coman. “Now that the genie has left the bottle, it is clear that [clinical] study teams are thinking about [decentralized trials] ubiquitously.”

Protecting clinical trial patients during COVID-19 by preventing travel to clinical trial sites is one important use case. But pandemic or no pandemic, patients are often required to travel long distances to trial sites, which is not only inconvenient, but also prevents many patients from participating. “The average patient needs to travel 26 miles in order to get to their clinical trial sites,” said Coman. “For very sick patients, how can you expect them to travel that far on a regular basis? We can set it up, for example, so that they can have one visit potentially at a facility that’s far away, or in some cases no visits that are far away, with procedures or assessments that can be done either at home, or at a local facility.” In addition to the added convenience of participating in a trial, decentralization also makes access to clinical research “universal to any patient,” he said.

Since only 5% of providers currently participate in clinical research, and only 8% of patients with a medical condition have been approached about joining a clinical study, there is a big opportunity to expand the tent with regard to trial participation. Science 37 locates patients through patient associations, targeted media, pharmacy partners, providers, and other sources.  It also plans to establish a “Diversity in Clinical Research Foundation” to make trials more accessible to underserved populations. More diversity in trials, in particular, is an area where clinical research needs improvement.  (Also see "Expanding The Tent: Improving Trial Participation Among Under-Represented Patient Populations" - In Vivo, 8 Apr, 2020.)

Are Trial Sponsors Ready?

According to a survey conducted on behalf of Science 37 in January 2021, more than half of biopharmaceutical executives reported that their companies had used “elements” of decentralized clinical trials (DCT) in the previous year. Only 4% of the executives said they had conducted a “fully” decentralized trial. Sixty-three percent of the executives said they plan to use elements of DCTs next year, and 17% said they plan to use full DCTs next year.

Despite this apparent desire to use DCTs, when asked if their organizations have the internal capabilities needed to operate a DCT, 59% said they did not. Coman said that Science 37’s operating system was flexible, so that it was able to provide the capabilities needed for a given trial, from full DCT to simply executing pieces of its technology, in a customized fashion, for clients.

Novartis was an early client of Science 37 and has used its technology for trials in therapeutic areas including dermatology, neuroscience and oncology. Other large pharmas, including Janssen, Genentech, Boehringer Ingelheim, Sanofi, Amgen and UCB have also partnered with or invested in Science 37.

Coman said it was a misconception that decentralized trials were only relevant to a limited number of therapeutic areas. “Today, most of our studies are in either infectious diseases or oncology … We’re doing things across every therapeutic area today. If you step back and look at a trial protocol in its totality, you will find opportunities” for using elements of a decentralized trial process.