Valo Health to go public via Khosla-backed SPAC, gaining $500M-plus

Another day, another SPAC deal. Three months after extending its crossover round to $300 million, Valo Health unveiled plans to go public by merging with a special purpose acquisition company formed by Khosla Ventures.

The combined company will have about $750 million in the bank when the deal closes sometime in the third quarter. That includes $250 million from Valo, $333 million from the SPAC, Khosla Ventures Acquisition Co., and $168.5 million through a private financing from the likes of Khosla Ventures, Koch Disruptive Technologies and Flagship Pioneering.

Khosla Ventures Acquisition Corp., or KVAC for short, raised $300 million in its Nasdaq IPO in March and went on the hunt for one or more companies “addressing large market opportunities with highly differentiated proprietary technology” to merge with or acquire, the SPAC said in a securities filing. It could have gone into several other sectors, such as food and agriculture or climate, but ultimately landed on Valo, a biotech using computational technology to transform drug development and trim years off R&D timelines.

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The proceeds from the deal will propel Valo’s preclinical and clinical programs, develop its software platform and support “new and existing growth initiatives,” Valo said in a statement Wednesday.

Valo revealed its first four preclinical programs in January when it closed the first $190 million of its series B round. Those comprise cancer treatments targeting a mixture of known targets and new targets: PARP1, NAMPT, USP28 and HDAC3. Two of its programs have since entered the clinic, the company said in the statement, though it did not specify which ones. And that’s not all—its bench is much deeper than that, with 15 prioritized preclinical programs in total across oncology and neurodegeneration as well as cardiovascular, metabolic and renal diseases, according to the statement.

The company’s pipeline is based on its Opal Computational Platform, an end-to-end drug discovery and development platform. As the company develops its prospects, the Opal technology actively learns, so the company isn't just advancing new medicines but also improving its discovery and development engine at the same time, said Valo CEO David Berry in a previous interview.

In the case of its PARP1 program, Valo used the platform to create a PARP inhibitor that could cross the blood-brain barrier without sacrificing efficacy and target PARP1 specifically rather than both PARP1 and PARP2, Berry said.

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It hopes to improve upon PARP inhibitors such as AstraZeneca and Merck's Lynparza and Zejula from GlaxoSmithKline's Tesaro, which have seen success in breast and ovarian cancers but don’t get into the brain. That stops them from being effectively used to treat cancers that spread to the brain as well as cancers that start in the brain.

Previously known as Integral Health, Valo launched in September 2020, acquiring Forma Therapeutics’ hit discovery capabilities for $2.5 million upfront, $17.5 million in installments and $10 million in equity. It had also acquired Numerate, which gave Valo the engineers who created a platform with more than 30,000 models and 70 trillion molecules.