‘The right scale of fuel’: Stamford-based Sema4 eyes more growth by going public

“It’ll be a big infusion of cash onto the Sema4 balance sheet to build out more rapidly and more completely the kind of solutions we’re delivering for patients, providers and health systems,” Sema4 founder and CEO Eric Schadt said in an interview. “What this provides is the right scale of fuel to get much more aggressive.”

To facilitate its transformation into a public company, Sema4 has entered an agreement with “special purpose acquisition company” CM Life Sciences that is expected to generate proceeds of up to approximately $793 million when the transaction is completed. Up to $343 million of that amount would be paid to Sema4 stockholders, and the remainder would support Sema4’s operations.

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Through the SPAC framework, Sema4 expects to accrue up to $500 million in available cash — a total that would include $450 million from the transaction, as well as existing cash on its balance sheet.

“For a biomedical company, you need so much money to keep doing the research and bringing products to market. Having that infusion of another $450 million will really help the company,” said Paul Pescatello, executive director and senior counsel for the Connecticut Business & Industry Association’s Connecticut Bioscience Growth Council. “It’s a very efficient way of raising the funds and being able to go forward.”

In addition to approximately $443 million of cash held in CM Life Sciences’ trust account, a group of institutional investors plans to participate through $350 million of “private investment in public equity.”

“It’s sort of an IPO in reverse because you’re setting the price up front, doing the ‘road show’ up front with getting all these big-name public investors signed up and then you do that ‘merger’ agreement and get ready to be public,” Schadt said. “It helps capture the value of the market today, helps set the (stock) price and gives you security.”

Those investors include Casdin Capital, Corvex Management, Greenwich-based Viking Global Investors, Fidelity Management & Research Company LLC, Counterpoint Global (Morgan Stanley), Perceptive Advisors, SB Management, a subsidiary of SoftBank Group Corp, and funds and accounts advised by T. Rowe Price Associates Inc. Existing investors include funds and accounts managed by Blackrock and Deerfield Management.

“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 chief investment officer 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. With an early start, unique business strategy and more than 150 leading data scientists, this is the premier company in one of the biggest, winner-take-most markets in life sciences.”

In a related move, CM Life Sciences held last September a $385 million initial public offering.

Signaling the market’s optimism about Sema4’s prospects, CM Life Sciences’ stock value surged by 42 percent on Wednesday, to close at about $22. CM Life Sciences trades under the “CMLF” ticker symbol.

“This makes it easier for a company like Sema4 to go public because CMLF has already handled the work of registration and all the ‘guts’ you need to be a public company,” Schadt said. “Whatever ticker symbol gets assigned to Sema4 will replace the CMLF ticker symbol, and we become that publicly traded stock.”

Sema4 had already garnered major investments. Last year, the company received a $121 million infusion from a group of backers that included the state-chartered investment agency Connecticut Innovations and Greenwich-based Oak HC/FT. The investment helped the company achieve at that point a valuation of more than $1 billion.

Growing in Connecticut

Since its 2017 spinoff from the Mount Sinai Health System into its own firm, Sema4 has expanded significantly in Connecticut.

Among recent developments, it announced last December the opening of an approximately 70,000-square-foot lab in Stamford’s Waterside section. It has the capacity to process thousands of genomic tests per day — crucial in Sema4’s efforts to provide information related to thousands of genetically identifiable diseases to patients across the country.

The new facility opened following the renovation of a building at 62 Southfield Ave. that dates to 1904 and once operated as a chocolate factory.

It replaced the firm’s old laboratory at the Mount Sinai campus in Manhattan and complements another lab, in Branford.

In total, Sema4 employs approximately 560 in Connecticut. About 200 of them work at the Stamford lab, alongside about 110 based in Branford and around 250 based at the Ludlow Street offices.

To support its expansion, the state Department of Economic and Community Development has provided Sema4 a total of $15.5 million in loans.

Since its founding, Sema4 has focused largely on reproductive health-based testing and analysis.

But it has diversified its services in the past year to respond to the coronavirus pandemic. At the Branford lab, it has built out a testing program that recently has been processing about 20,000 to 25,000 viral tests each week.

Across all its operations, Sema4 has amassed more than 10 million patient records.

Sema4’s name refers to semaphore — a system used to send signals. The company has said it aims to “discern signal from noise across trillions of data points” to gain insights into human health.

pschott@stamfordadvocate.com; Twitter: @paulschott