ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the
“Company,” “Health Sciences Acquisitions Corporation 2,” “our,” “us” or “we”
refer to Health Sciences Acquisitions Corporation 2. The following discussion and analysis of the Company’s financial condition
and results of operations should be read in conjunction with the annual financial statements and the notes thereto contained elsewhere
in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Overview
We are a blank check company incorporated as a
Cayman Islands company on May 25, 2020. We were formed for the purpose entering into a merger, share exchange, asset acquisition, share
purchase, recapitalization, reorganization or other similar business combination with one or more target businesses (the “Business
Combination”). Our efforts to identify a prospective target business will not be limited to any particular industry or geographic
region, although we intend to focus our search on target businesses domiciled in North America or Europe that are developing assets in
the biopharma and medical technology sectors. We are an emerging growth company and, as such, we are subject to all of the risks associated
with emerging growth companies.
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Our sponsor is HSAC 2 Holdings, LLC (the “Sponsor”).
The registration statement for the initial public offering (the “Initial Public Offering”) was declared effective on August
3, 2020. On August 6, 2020, we consummated an Initial Public Offering of 16,000,000 ordinary shares (the “Public Shares”),
including the 2,086,956 Public Shares as a result of the underwriters’ full exercise of their over-allotment option, at an offering
price of $10.00 per Public Share, generating gross proceeds of $160.0 million, and incurring offering costs of approximately $9.4 million,
inclusive of $5.6 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial
Public Offering, we consummated the private placement (“Private Placement”) of (i) 450,000 ordinary shares (“Private
Placement Share”) at $10.00 per Private Placement Share (for a total purchase price of $4.5 million) and (ii) 1,500,000 warrants
(“Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant (for a total purchase price of $1.5 million),
for an aggregate of $6.0 million to the Sponsor, generating gross proceeds of $6.0 million.
Upon the closing of the Initial Public Offering and
the Private Placement (including the exercise of the over-allotment), $160.0 million ($10.00 per Public Share) of the net proceeds
of the sale of the Public Shares in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust
Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and held as cash or
invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under the Investment Company Act, which
invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business
Combination and (ii) the distribution of the Trust Account.
We paid a total of $3.2 million in underwriting
discounts and commissions (not including the $5.6 million deferred underwriting commission payable at the consummation of the initial
Business Combination) and approximately $0.6 million for other costs and expenses related to our formation and the Initial Public Offering.
We will have until August 6, 2022, to complete
our initial Business Combination (the “Combination Period”). If we do not complete a Business Combination by that date, it
will trigger the Company’s automatic winding up, liquidation and dissolution and, upon notice from us, the trustee of the Trust
Account will distribute the amount in the Trust Account to the Public Shareholders. Concurrently, we shall pay, or reserve for payment,
from funds not held in trust, its liabilities and obligations, although we cannot assure that there will be sufficient funds for such
purpose. If there are insufficient funds held outside the Trust Account for such purpose, our Sponsor has agreed that it will be liable
to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities
that are owed money by us for services rendered or contracted for or products sold to us and which have not executed a waiver agreement.
However, we cannot assure that the liquidator will not determine that he or she requires additional time to evaluate creditors’
claims (particularly if there is uncertainty over the validity or extent of the claims of any creditors). We also cannot assure that a
creditor or shareholder will not file a petition with the Cayman Islands Court which, if successful, may result in our company’s
liquidation being subject to the supervision of that court. Such events might delay distribution of some or all of our assets to the Public
Shareholders. The holders of the Insider Shares prior to the Initial Public Offering (the “Initial Shareholders”) have agreed
to waive their liquidation rights with respect to the Insider Shares and Private Placement Shares held by them if we fail to complete
a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the
Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares
if we fail to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their
deferred underwriting commission held in the Trust Account in the event we do not complete a Business Combination within the Combination
Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption
of our Public Shares. In the event of such distribution, it is possible that the per ordinary share value of the residual assets remaining
available for distribution (including Trust Account assets) will be only $10.00 per ordinary share initially held in the Trust Account.
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Liquidity and Going Concern
As of December 31, 2021,
we had approximately $1.8 million of cash in our operating account and working capital of approximately $1.6 million.
Prior to the completion of the Initial Public
Offering, our liquidity needs had been satisfied through a payment of $28,750 from our Sponsor to exchange for the issuance of 3,593,750
ordinary shares to the Sponsor, and a loan of $300,000 pursuant to a promissory note originally issued to our Sponsor on June 11, 2020
(the “Note”), which was repaid in full on August 7, 2020. Subsequent to the consummation of the Initial Public Offering and
Private Placement, our liquidity needs have been satisfied with the proceeds from the consummation of the Private Placement not held in
the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but
is not obligated to, provide us loans (the “Working Capital Loans”). As of December 31, 2021 and 2020, there were no
amounts outstanding under any Working Capital Loans.
Based
on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through
the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using
these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge
with or acquire, and structuring, negotiating and consummating the Business Combination. We plan to complete a business combination
by the mandatory liquidation date. However, in connection with our assessment of going concern considerations in accordance with
FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to
Continue as a Going Concern,” we have determined that the mandatory liquidation and subsequent dissolution raises substantial
doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should we be required to liquidate after August 6, 2022. The financial statements do not include any adjustment that
might be necessary if we are unable to continue as a going concern.
Management continues to evaluate the impact of
the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The
financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity from
inception to December 31, 2021 was for our formation, preparation for our Initial Public Offering, and, since the closing of our Initial
Public Offering, a search for business combination candidates. We will not be generating any operating revenues until the closing and
completion of our initial Business Combination, at the earliest. We generate non-operating income in the form of interest income on investments
held in the Trust Account. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting
and auditing compliance).
For the year ended December
31, 2021, we had a net loss of approximately $379,000 which consisted of approximately $275,000 in general and administrative expenses
and related party administrative fees of $120,000, partially offset by approximately $16,000 of net income on the investments held in
the Trust Account.
For the period from May
25, 2020 (inception) through December 31, 2020, we had a net loss of approximately $174,000, which consisted of approximately $130,000
in general and administrative expenses and related party administrative fees of $50,000, partially offset by approximately $6,000 of net
income on the investments held in the Trust Account.
Related Party Transactions
Insider Shares
On June 11, 2020, we issued 3,593,750 ordinary
shares to the Sponsor (the “Insider Shares”) for an aggregate purchase price of $28,750. On August 3, 2020, we effected
a share dividend of 0.113043478 ordinary shares for each outstanding share (an aggregate of 406,250 ordinary shares), resulting
in an aggregate of 4,000,000 ordinary shares outstanding. All shares and associated amounts have been retroactively restated to reflect
the share dividend. The holders of the Insider Shares had agreed to forfeit up to an aggregate of 521,739 Insider Shares, on a pro rata
basis, to the extent that the option to purchase additional ordinary shares is not exercised in full by the underwriters. On August 6,
2020, the underwriters fully exercised the over-allotment option; thus, the 521,739 Insider Shares were no longer subject to forfeiture.
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The Initial Shareholders have agreed not to transfer,
assign or sell any of their Insider Shares (except to certain permitted transferees) until, with respect to 50% of the Insider Shares,
the earlier of six months after the date of the consummation of the initial Business Combination and the date on which the closing price
of our ordinary shares equals or exceeds $12.50 per ordinary share for any 20 trading days within a 30-trading day period following
the consummation of the initial Business Combination, and, with respect to the remaining 50% of the Insider Shares, six months after the
date of the consummation of the initial Business Combination, or earlier in each case if, subsequent to the initial Business Combination,
we complete a liquidation, merger, stock exchange or other similar transaction which results in all of the shareholders having the right
to exchange their ordinary shares for cash, securities or other property.
Related Party Loans
On June 11, 2020, our Sponsor agreed to loan
us up to $300,000 to be used for the payment of costs related to the Initial Public Offering pursuant to the Note. The Note was non-interest bearing,
unsecured and due on the date we consummate the Initial Public Offering. We borrowed $300,000 under the Note, and repaid the Note in full
on August 7, 2020.
In addition, in order to finance transaction costs
in connection with a Business Combination, the Initial Shareholders may, but are not obligated to, loan us the Working Capital Loans,
from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a
promissory note. The notes would either be paid upon consummation of the initial Business Combination, without interest, or, at the lender’s
discretion, up to $500,000 of such loans may be converted upon consummation of the Business Combination into additional private warrants
at a price of $1.00 per warrant. If we do not complete a Business Combination within the Combination Period, the Working Capital Loans
will be repaid only from amounts remaining outside the Trust Account, if any. The warrants would be identical to the Private Placement
Warrants. As of December 31, 2021 and 2020, the Company had no borrowings under the Working Capital Loans.
Administrative Services Agreement
Commencing on the date of our prospectus, we agreed
to pay the Sponsor a total of $10,000 per month for office space and certain office and secretarial services. Upon completion of the Business
Combination or our liquidation, we will cease paying these monthly fees. For the year ended December 31, 2021 and the period from May
25, 2020 (inception) through December 31, 2020, we incurred $120,000 and $50,000 in expenses for these services, respectively.
Contractual Obligations
Registration Rights
The holders of the Insider Shares, Private Placement
Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any ordinary shares issuable
upon the exercise of the Private Placement Warrants) are entitled to registration rights pursuant to a registration rights agreement.
The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of
the majority of the Insider Shares can elect to exercise these registration rights at any time commencing three months prior to the date
on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Placement Shares, Private Placement
Warrants or warrants that may be issued upon conversion of Working Capital Loans made to us can elect to exercise these registration rights
at any time after we consummate a Business Combination. In addition, the holders have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to our consummation of the initial Business Combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
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Underwriting Agreement
We granted the underwriters
a 45-day option from the date of the prospectus to purchase up to 2,086,956 additional ordinary shares at the Initial Public Offering
price less the underwriting discounts and commissions. On August 6, 2020, the underwriters fully exercised the over-allotment option.
The underwriters were
entitled to an underwriting discount of $0.20 per share, or $3.2 million in the aggregate, paid upon the closing of the Initial
Public Offering. In addition, the underwriters will be entitled to a deferred underwriting commission of $0.35 per share, or $5.6 million
in the aggregate since the underwriters’ over-allotment option was exercised in full. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms
of the underwriting agreement.
Purchase Agreement
Our Sponsor has entered
into an agreement with us to purchase an aggregate of 2,500,000 of our ordinary shares or their equivalent in the securities of a target
company for an aggregate purchase price of $25.0 million prior to, concurrently with, or following the closing of our Business Combination,
either in the open market transaction (to the extent permitted by law) or in a private placement. The capital from such transaction may
be used as part of the consideration to the sellers in our initial Business Combination, and any excess capital from such private placement
would be used for working capital in the post-transaction company.
Critical Accounting Policies
Investments Held in the Trust Account
Our portfolio of investments held in the Trust
Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with
a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily
determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S.
government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented
on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these
securities are included in interest income from investments held in Trust Account in the accompanying statements of operations. The estimated
fair values of investments held in the Trust Account are determined using available market information.
Ordinary Shares
Subject to Possible Redemption
We account for our ordinary shares subject to
possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares
subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other
times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered
to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2021 and 2020,
16,000,000 ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity
section of the accompanying balance sheets.
Under ASC 480-10-S99, we have elected to recognize
changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value
at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of the
security. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
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Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements
of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per ordinary share is calculated by dividing the net income
(loss) by the weighted average number of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per
ordinary share does not consider the effect of the Private Placement Warrants to purchase 1,500,000 ordinary shares since their exercise
is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net
loss per share is the same as basic net loss per share for year ended December 31, 2021 and the period from May 25, 2020 (inception) through
December 31, 2020. Accretion associated with the redeemable ordinary shares is excluded from earnings per share as the redemption value
approximates fair value.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements
as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
JOBS Act
The Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with
new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay
the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the
relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements
may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are
in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we
may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted
by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about
the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items
such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee
compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until
we are no longer an “emerging growth company,” whichever is earlier.
Recent Accounting
Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required
for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation
in certain areas. We adopted ASU 2020-06 on January 1, 2021 ( using the modified retrospective method for transition. Adoption of the
ASU did not impact our financial position, results of operations or cash flows.
Our management does not
believe there are any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds of the Initial Public Offering
and the Private Placement held in the Trust Account are invested in U.S. government treasury bills with a maturity of 185 days or less
or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S.
government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure
to interest rate risk.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and the notes thereto begin on page F-1 of
this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are
procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange
Act, such as this Annual Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s
rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated
to our management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as
of December 31, 2021 because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically,
the Company’s management has concluded that our control around the interpretation and accounting for certain complex financial instruments
was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s audited balance
sheet as of August 6, 2020, audited annual financial statements as of and for the period ended December 31, 2020, and the Company’s
interim financial statements and notes for the quarters ended September 30, 2020, March 31, 2021, June 30, 2021, and September 30, 2021.
Additionally, this material weakness could result in a misstatement of ordinary shares subject to possible redemption, ordinary shares
and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented
or detected on a timely basis. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that
our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes
that the financial statements included in this Annual Report on Form 10-K present fairly in all material respects our financial
position, results of operations and cash flows for the periods presented.
We do not expect that
our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and
procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints,
and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures,
no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies
and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.
Management’s
Report on Internal Controls Over Financial Reporting
As required by SEC rules
and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with
U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
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Because of its inherent
limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2021. In making these assessments, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework
(2013). Based on our assessments and those criteria, management determined that our internal controls over financial reporting were
not effective as of December 31, 2021, because of material weaknesses in our internal control over financial reporting. Specifically,
our management has concluded that our control around the interpretation and accounting for complex financial instruments was not
effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of
August 6, 2020, its annual financial statements for the period ended December 31, 2020 and its interim financial statements for the quarters
ended September 30, 2020, March 31, 2021 and June 30, 2021.
This Annual Report on
Form 10-K does not include an attestation report of internal controls from our independent registered public accounting firm due to our
status as an emerging growth company under the JOBS Act.
Changes in Internal
Control over Financial Reporting
During the most recently
completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the restatement
of our financial statements described in this Annual Report on Form 10-K had not yet been identified.
Our Chief Executive Officer
and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting
with subject matter experts related to the accounting for certain complex financial instrument. The Company’s management has expended,
and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control
over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements
and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure
that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
26
part
III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following
table sets forth information about our directors and executive officers:
Name Age Position
Roderick Wong 44 President, Chief Executive Officer and Chairman
Alice Lee 51 Vice President of Operations, Secretary and Treasurer
Pedro Granadillo 74 Director
Carsten Boess 56 Director
Stuart Peltz 62 Director
Michael Brophy 42 Director
Roderick
Wong, MD, has served as our President and Chief Executive Officer since June 2020 and as a member of our board of directors
since our inception. Dr. Wong has more than 16 years of healthcare investing experience. Since 2009, he has served as Managing
Partner and Chief Investment Officer of RTW. Prior to forming RTW, Dr. Wong was a Managing Director and sole Portfolio Manager for
the Davidson Kempner Healthcare Funds. Prior to joining Davidson Kempner, Dr. Wong held various healthcare investment and research
roles at Sigma Capital Partners and Cowen & Company. Dr. Wong served as Chairman of the board of directors of Health Sciences
Acquisitions Corporation (“HSAC”) and its Chief Executive Officer from January 2019 until December 2019. Other
current and previous directorships include: Rocket Pharmaceuticals, Inc., where he serves as Chairman, a position he has held since Rocket’s
inception in July 2015; Attune Pharmaceuticals, a portfolio company of RTW, where he has served as a director since June 2018;
Landos Biopharma and Ji Xing Pharmaceuticals, portfolio companies of RTW, where he has served as director since 2019, and NiKang Therapeutics,
a portfolio company of RTW, where he has served as a director since September 2020. Dr. Wong previously served on the board of directors
of Penwest Pharmaceuticals in 2010 and Avidity Biosciences from 2019 until August 2021. He simultaneously received an MD from the University
of Pennsylvania Medical School and an MBA from Harvard Business School, and graduated Phi Beta Kappa with a BS in Economics from Duke
University.
Naveen
Yalamanchi, MD, has served as our Executive Vice President and Chief Financial Officer and as a member of our board of directors
since June 2020. Dr. Yalamanchi has more than 15 years of healthcare investment and research experience. Since 2015, Dr. Yalamanchi
has been a Partner and Portfolio Manager at RTW. Prior to joining RTW, Dr. Yalamanchi was Vice President and Co-Portfolio Manager
at Calamos Arista Partners, a subsidiary of Calamos Investments, a position he held from 2011 to 2015. Prior to joining Calamos Arista
Partners, Dr. Yalamanchi held various healthcare investment roles at Millennium Management and Davidson Kempner Capital Management,
where he worked with Dr. Wong. Dr. Yalamanchi graduated Phi Beta Kappa with a BS in Biology from the Massachusetts Institute
of Technology and received an MD from the Stanford University School of Medicine. He completed his surgical internship at UCLA Medical
Center. Dr. Yalamanchi served as Vice President and Chief Financial Officer of HSAC from January 2019 until December 2019
and as a director of HSAC from December 2018 until December 2019. Other prior and current directorships include: Rocket Pharmaceuticals,
Inc., where he has served as a director since Rocket’s inception in July 2015, and Ancora Heart and Magnolia Medical
Technologies, portfolio companies of RTW, where Dr. Yalamanchi serves as an observer to the board of directors.
Alice
Lee, JD, has served as our Vice President of Operations and as our Secretary and Treasurer since June 2020. Ms. Lee has
served as RTW’s Senior Counsel since October 2017 and Chief Compliance Officer from February 2019 to February 2021 and
has more than a decade of experience advising life sciences companies in corporate and transactional matters. Prior to joining RTW, she
most recently served as a senior associate in the Life Sciences practice at Ropes & Gray LLP from 2015 to 2017. Prior to that,
she worked in the Intellectual Property Transactions and Technology practice at Sullivan & Cromwell LLP from 2010 to 2015, and
she began her legal career in the Mergers & Acquisitions practice at Cravath, Swaine & Moore LLP. Ms. Lee served
as Vice President of Operations of HSAC from January 2019 until December 2019. Ms. Lee received her law degree from Columbia
Law School, where she served as a Senior Editor of Columbia Law Review and was a Harlan Fiske Stone Scholar. She earned an MS from Stanford
University in Computer Science (with an emphasis in Bioinformatics), completed two years of pre-clinical coursework at the Stanford
University School of Medicine, where she was an MD candidate, and graduated Phi Beta Kappa and summa cum laude with a BA in Philosophy
from Columbia University. Prior to law school, Ms. Lee worked as a computational biologist at the H. Lee Moffitt Cancer Center &
Research Institute at the University of South Florida and co-authored “The promise of gene signatures in cancer diagnosis
and prognosis” included in the Encyclopedia of Genetics, Genomics, Proteomics and Bioinformatics and “Fundamentals of Cancer
Genomics and Proteomics” included in Surgery: Basic Science and Clinical Evidence. She also worked as a software development engineer
intern at Amazon.com.
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Stephanie
A. Sirota has served as our Vice President of Corporate Strategy and Corporate Communications since June 2020. Ms. Sirota
has served as RTW’s Chief Business Officer since 2012 and as a Partner since 2014. Ms. Sirota is responsible for strategy
and oversight of RTW’s business development and strategic partnerships with counterparties including limited partners, banks and
academic institutions. She is also responsible for shaping the firm’s governance policies underscoring impact and sustainability.
Ms. Sirota has more than a decade of deal experience in financial services. Prior to joining RTW, from 2006 to 2010, she served
as a director at Valhalla Capital Advisors, a macro and commodity investment manager. From 2000 to 2003, Ms. Sirota worked in the
New York and London offices of Lehman Brothers, where she advised on various mergers & acquisitions, IPOs, and capital
market financing transactions with a focus on cross-border transactions for the firm’s global corporate clients. She began
her career on the Fixed Income trading desk at Lehman Brothers, structuring derivatives for municipal issuers from 1997 to 1999. Ms. Sirota
served as Vice President of Corporate Strategy of HSAC from January 2019 until December 2019. Other current directorships include
RTW Venture Fund Limited (LSE: “RTW”), where Ms. Sirota has served as a director since October 2019. Ms. Sirota
graduated with honors from Columbia University and also received an MS from the Columbia Graduate School of Journalism. She has contributed
to Fortune Magazine and ABCNews.com. Ms. Sirota is a supporter of the arts, science, and children’s initiatives. She serves
as Co-Chairman of the Council of the Phil at the New York Philharmonic. She also serves as President of RTW Charitable Foundation.
Pedro
Granadillo has served as our director since August 2020. Mr. Granadillo has nearly 50 years of biopharmaceutical industry
experience with expertise in human resources, manufacturing, quality control, and corporate governance. From 1970 until his retirement
in 2004, Mr. Granadillo held multiple leadership roles at Eli Lilly and Company, including Senior Vice President of Global Manufacturing
and Human Resources and a member of the Executive Committee. Mr. Granadillo currently serves on the board of directors of Rocket
Pharmaceuticals, Inc., a position he has held since January 2018. Mr. Granadillo has previously served on the boards of directors
at Haemonetics Corporation from 2004 to 2019, Dendreon Corporation, Nile Therapeutics and Noven Pharmaceuticals, as well as NPS Pharmaceuticals,
which was sold to Shire for $5.2 billion in 2015. Mr. Granadillo is also a co-founder and board member of Neumentum Pharmaceuticals,
a private non opioid pain company. Mr. Granadillo graduated from Purdue University with a Bachelor of Science in Industrial Engineering.
Carsten
Boess has served as our director since August 2020. Mr. Boess has served as a director for Rocket Pharmaceuticals, Inc.
since January 2016, Avidity Biosciences since April 2020, and Achilles Therapeutics since April 2020. Previously, Mr. Boess was
the Executive Vice President of Corporate Affairs at Kiniksa Pharmaceuticals, Ltd. from August 2015 until February 2020. Before Kiniksa,
Mr. Boess was the Chief Financial Officer at Alexion Pharmaceuticals from 2004 to 2005 and the Senior Vice President and Chief Financial
Officer at Synageva BioPharma Corp. from 2011 until the company’s acquisition by Alexion Pharmaceuticals in 2015. Previously, Mr. Boess
served in multiple roles with increasing responsibility at Insulet Corporation, including Chief Financial Officer from 2006 to 2009 and
Vice President of International Operations from 2009 to 2011. Prior to that, Mr. Boess served as Executive Vice President of Finance
at Serono Inc. from 2005 to 2006. In addition, he was a member of the Geneva-based World Wide Executive Finance Management Team
while at Serono. Mr. Boess also held several financial executive roles at Novozymes of North America and Novo Nordisk in France,
Switzerland and China. During his tenure at Novo Nordisk, he served on Novo Nordisk’s Global Finance Board. Mr. Boess received
a Bachelor’s degree and Master’s degree in Economics and Finance, specializing in Accounting and Finance from the University
of Odense, Denmark.
Stuart
Peltz, PhD, has served as our director since August 2020. Dr. Peltz founded PTC Therapeutics in 1998 and has served as Chief
Executive Officer and a member of the board of directors since our inception. Prior to founding PTC, Dr. Peltz was a Professor in the
Department of Molecular Genetics & Microbiology at the Robert Wood Johnson Medical School, Rutgers University. Dr. Peltz currently
serves as a director of the Biotechnology Industry Organization (BIO) and serves on BIO’s Emerging Companies Section Governing
Board. Dr. Peltz received a Ph.D. from the McArdle Laboratory for Cancer Research at the University of Wisconsin.
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Michael
Brophy has served as our director since August 2020. Mr. Brophy has served as the Chief Financial Officer of Natera since
February 2017. Previously, Mr. Brophy served as Natera’s Senior Vice President, Finance and Investor Relations since September
2016, and prior to that, as Vice President, Corporate Development and Investor Relations since September 2015. Prior to joining Natera,
Mr. Brophy served in the investment banking division at Morgan Stanley and Deutsche Bank where he focused on advising corporate
clients in the life science tools and diagnostics sector. Mr. Brophy holds an MBA from the University of California, Los Angeles
and a Bachelor of Science in Economics from the United States Air Force Academy.
Number
and Terms of Office of Officers and Directors
Our
board of directors has six members, four of whom are “independent” under SEC and Nasdaq rules. Our board of directors is
divided into three classes with only one class of directors being elected in each year and each class serving a three-year term.
We may not hold an annual general meeting until after we consummate our initial business combination.
Our
officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms
of office. Our board of directors is authorized to appoint persons to the offices set forth in our Amended and Restated Memorandum and
Articles of Association as it deems appropriate. Our Amended and Restated Memorandum and Articles of Association provide that our directors
may consist of a chairman of the board, and that our officers may consist of chief executive officer, president, chief financial officer,
executive vice president(s), vice president(s), secretary, treasurer and such other officers as may be determined by the board of directors.
Director
Independence
Nasdaq
listing standards require that within one year of the listing of our ordinary shares on the Nasdaq Capital Market we have at least three
independent directors and that a majority of our board of directors be independent. An “independent director” is defined
generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship
which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment
in carrying out the responsibilities of a director. Our Board of Directors had determined that Pedro Granadillo, Carsten Boess, Stuart
Peltz, and Michael Brophy are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules.
Our independent directors will have regularly scheduled meetings at which only independent directors are present.
We
will only enter into a business combination if it is approved by a majority of our independent directors. Additionally, we will only
enter into transactions with our officers and directors and their respective affiliates that are on terms no less favorable to us than
could be obtained from independent parties. Any related-party transactions must be approved by our audit committee and a majority
of disinterested directors.
Audit
Committee
We
have established an audit committee of the board of directors, which consists of Carsten Boess, Pedro Granadillo, and Michael Brophy,
each of whom is an independent director. Carsten Boess serves as chairman of the audit committee. The audit committee’s duties,
which are specified in our Audit Committee Charter, include, but are not limited to:
● discussing with management major risk assessment and risk management policies;
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● reviewing and approving all related-party transactions;
● appointing or replacing the independent registered public accounting firm;
Financial
Experts on Audit Committee
The
audit committee will at all times be composed exclusively of “independent directors” who are “financially literate”
as defined under the Nasdaq listing standards. The Nasdaq listing standards define “financially literate” as being able to
read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In
addition, we must certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience
in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results
in the individual’s financial sophistication. The board of directors has determined that Carsten Boess qualifies as an “audit
committee financial expert,” as defined under rules and regulations of the SEC.
Compensation
Committee
We
have established a compensation committee of the board of directors consisting of Pedro Granadillo and Carsten Boess, each of whom is
an independent director. Pedro Granadillo serves as chairman of the compensation committee. We adopted a Compensation Committee Charter,
will detail the principal functions of the compensation committee, including:
● reviewing our executive compensation policies and plans;
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The
charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation
consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work
of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other
adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and
the SEC.
Director
Nominations
We
do not have a standing nominating committee, though we intend to form a corporate governance and nominating committee as and when required
to do so by law or Nasdaq rules. In accordance with Rule 5605(e)(2) of the Nasdaq rules, a majority of the independent directors
may recommend a director nominee for selection by the board of directors.
Our
board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving
director nominees without the formation of a standing nominating committee. Michael Brophy, Stuart Peltz, Carsten Boess, and Pedro Granadillo
will participate in the consideration and recommendation of director nominees. In accordance with Rule 5605(e)(1)(A) of the Nasdaq rules,
all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
Our
board of directors will also consider director candidates recommended for nomination by our shareholders during such times as they are
seeking proposed nominees to stand for election at the next annual general meeting (or, if applicable, extraordinary general meeting).
Our shareholders that wish to nominate a director for election to the Board should follow the procedures set forth in our Amended and
Restated Memorandum and Articles of Association.
We
have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.
In general, in identifying and evaluating nominees for director, our board of directors considers educational background, diversity of
professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent
the best interests of our shareholders.
Code
of Ethics
We
adopted a Code of Ethics that applies to all of our executive officers, directors and employees. The Code of Ethics codifies the business
and ethical principles that govern all aspects of our business.
Conflicts
of Interest
Potential
investors should be aware of the following potential conflicts of interest:
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Under
Cayman Islands law, directors and officers owe the following fiduciary duties:
(iii) directors should not improperly fetter the exercise of future discretion;
(v) duty to exercise independent judgment.
In
addition to the above, directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement
to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person
carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience
which that director has.
As
set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing,
or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be
forgiven and/or authorized in advance by the shareholders, provided that there is full disclosure by the directors. This can be done
by way of permission granted in the Amended and Restated Memorandum and Articles of Association or alternatively by shareholder approval
at general meetings.
Accordingly,
as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business
opportunities meeting the above-listed criteria to multiple entities. In addition, conflicts of interest may arise when our board
evaluates a particular business opportunity with respect to the above-listed criteria. We cannot assure you that any of the above-mentioned conflicts
will be resolved in our favor. Furthermore, most of our officers and directors have pre-existing fiduciary obligations to other
businesses of which they are officers or directors. To the extent they identify business opportunities which may be suitable for the
entities to which they owe pre-existing fiduciary obligations, our officers and directors will honor those fiduciary obligations.
Accordingly, it is possible they may not present opportunities to us that otherwise may be attractive to us unless the entities to which
they owe pre-existing fiduciary obligations and any successors to such entities have declined to accept such opportunities.
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In
order to minimize potential conflicts of interest which may arise from multiple corporate affiliations, each of our officers and directors
has contractually agreed, pursuant to a written agreement with us, until the earliest of a business combination, our liquidation or such
time as he or she ceases to be an officer or director, to present to our company for our consideration, prior to presentation to any
other entity, any suitable business opportunity which may reasonably be required to be presented to us, subject to any pre-existing fiduciary
or contractual obligations he might have.
In
connection with the vote required for any business combination, all of our existing shareholders, including all of our officers and directors,
have agreed to vote their respective insider shares and private shares in favor of any proposed business combination. In addition, they
have agreed to waive their respective rights to participate in any liquidation distribution with respect to those ordinary shares acquired
by them prior to our initial public offering. For any other shares, however, they would be entitled to participate in any liquidation
distribution in respect of such shares but have agreed not to convert such shares (or sell their shares in any tender offer) in connection
with the consummation of our initial business combination or an amendment to our Amended and Restated Memorandum and Articles of Association
relating to pre-business combination activity.
All
ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed
by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval
by our audit committee and a majority of our uninterested “independent” directors, or the members of our board who do not
have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We
will not enter into any such transaction unless our audit committee and a majority of our disinterested “independent” directors
determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such
a transaction from unaffiliated third parties.
To
further minimize conflicts of interest, we have agreed not to consummate our initial business combination with an entity that is affiliated
with any of our officers, directors or other initial shareholders, unless we have obtained (i) an opinion from an independent investment
banking firm that the business combination is fair to our unaffiliated shareholders from a financial point of view and (ii) the
approval of a majority of our disinterested and independent directors (if we have any at that time). In no event will our initial shareholders
or any of the members of our management team be paid any finder’s fee, consulting fee or other similar compensation prior to, or
for any services they render in order to effectuate, the consummation of our initial business combination (regardless of the type of
transaction that it is).
Limitation
on Liability and Indemnification of Directors and Officers
Our
memorandum and articles of association provide that, subject to certain limitations, the company shall indemnify its directors and officers
against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in
connection with legal, administrative or investigative proceedings. Such indemnity only applies if the person acted honestly and in good
faith with a view to what the person believes is in the best interests of the company and, in the case of criminal proceedings, the person
had no reasonable cause to believe that their conduct was unlawful. The decision of the directors as to whether the person acted honestly
and in good faith and with a view to the best interests of the company and as to whether the person had no reasonable cause to believe
that his conduct was unlawful and is, in the absence of fraud, sufficient for the purposes of the memorandum and articles of association,
unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entering
of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view
to the best interests of the company or that the person had reasonable cause to believe that his conduct was unlawful.
We
have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification
provided for in our memorandum and articles of association. Our memorandum and articles of association also permit us to purchase and
maintain insurance on behalf of any officer or director who at the request of the company is or was serving as a director or officer
of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, against
any liability asserted against the person and incurred by the person in that capacity, whether or not the company has or would have had