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Valo Health, a drug discovery company founded less than a year ago, goes public through merger which values the firm at approximately $ 2.8 billion.
On Wednesday, the Boston-based company announced a merger agreement with Khosla Ventures Acquisition, a special purpose vehicle company (SPAC). When the deal is closed, the combined company will have a cash balance of approximately $ 750 million before deducting transaction costs.
Valo aims to be the first digital native pharmaceutical company, according to an investor presentation. The Valo name may not be familiar to many, but its founder / investor, Flagship Pioneering, may be familiar. Flagship is a venture capital firm with a history of building companies that use platform technologies to solve major scientific problems. Perhaps the most famous company to emerge from Flagship is Messenger RNA biotech Moderna.
Flagship launched Valo last September., but in fact the company began to form in 2019 with the acquisition drug discovery startup Numerate… The San Bruno, California-based company has built a platform with over 30,000 models, 70 trillion molecules, and over 25 drug programs. The following year, Valo expanded to acquire assets from Forma Therapeutics, including compound libraries and experimental drugs in development.
Samir Kaul, Founding Partner and Managing Director of Khosla Ventures, met with Valo Founder and CEO David Berry at Flagship, where Berry has been CEO since 2005. In a presentation to investors, Berry described the legacy drug discovery and development model as outdated: slow and expensive. Valo’s drug discovery technology, Opal, is designed to achieve greater success through an approach that puts the individual at the center of drug discovery and development.
“We’re seeing a lot of effort being put into applying AI cells in the legacy model,” Berry said. “This approach suffers from the same translation problem as always: cells are cells, cells are not people, diseases are complex. We are creating a system that allows us to reflect the real diseases of people, and not artificially. “
Opal doesn’t just construct and synthesize molecules. Berry said the technology is launching simulations that the molecule is optimized for its activity against disease, is better processed by the body, and has low toxicity. The company claims to have built over 30,000 predictive models and made over 2 billion predictions.
Patient data form the basis of Opal; this data is requested by artificial intelligence. Berry said Opal provides insights such as identifying key patterns of clinical response to a drug and finding patient subpopulations that can be treated with therapy. Every experiment that Opal conducts is reintroduced into the platform; According to Berry, the machine learning techniques used in these experiments make the system better, smarter, and more efficient.
While Valo has an internal drug portfolio, the company also plans to develop partnerships with companies interested in using Opal for their own research. Going forward, Berry said he envisions launching Opal-backed software enterprises that will make the company’s business model “the default choice for all drug developers and beyond.”
In the short term, Valo will focus on the drugs that are currently in its development. Valo has 17 programs for cardiovascular / metabolic / renal disorders, cancer and neurodegenerative diseases. The two most advanced programs are ready for Phase 2: OPL-0301 is in development for the treatment of acute kidney injury, and OPL-0401 is a potential treatment for diabetic complications such as diabetic retinopathy.
Valo plans to begin Phase 2 clinical trials of OPL-0301 in the fourth quarter of this year, according to the investor presentation. A Phase 2 trial of OPL-0401 is scheduled for next year. The company also plans to include its most advanced cancer-fighting program in preclinical research, an immune oncology candidate called OPL-0101, which will support the app to start human testing.
When the merger is complete, the combined company will have a cash balance of approximately $ 250 million in Valo’s treasury and approximately $ 333 million from Khosla. The new Valo will also raise $ 168.5 million in private funding, which includes commitments made by Valo’s earlier investors as well as new investors in the company.
Disclosed new investors include Khosla Ventures, NG MGG Strategic, Caz Investments. Returning investors include Koch Disruptive Technologies, Flagship Pioneering, the Public Sector Pension Investment Council, Invus, State of Michigan Retirement Systems, HBM Healthcare Investments, and the Longevity Vision Fund.
The capital from the merger will be used to develop Valo’s preclinical and clinical assets, develop its software platform and support the company’s growth plans.
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