GigCaptal5, QT Imaging Boast SPAC Deal

GigCapital5, a publicly traded special purpose acquisition company (SPAC), and QT Imaging, a medical imaging company that develops products for body imaging, recently announced they have entered into a definitive business combination agreement. The agreement would result in QT Imaging becoming a publicly listed company subject to closing and combined will be named QT Imaging Holdings upon closing of the transaction. QT Imaging Holdings will be traded on the NYSE under the symbol “QTI”.

QT Imaging’s QTscan ultrasound scanner is FDA approved as an adjunct to mammography, for which approximately 39 million women in the United States get each year, and for every 20 positive test finding, only one is found to be cancerous. Such a high callback rate for mammograms can lead to unnecessarily risky, painful, and expensive follow up procedures. However, unlike traditional breast imaging modalities, the QTscan does not require radiation, injection contract agents, or compression, according to QT Imaging, and is accurate and repeatable. This allows for earlier and more frequent monitoring for women undergoing nonsurgical breast cancer treatments like adjuvant chemotherapy, radiation therapy, cryotherapy, and hormone or selective hormone receptor modulation treatments.

QT Imaging is entering into a commercial growth phase and intends to use the merger proceeds to seek to attain additional FDA approvals and further expand its commercial reach.

“It is a moral mission for the GigCapital5 team to partner with QT Imaging’s team to bring to the public markets their first breakthrough, FDA-cleared for breast imaging scanner, QTscan, as well as to support development and FDA clearances for imaging applications beyond the breast,” said Dr. Avi Katz, founding managing partner of GigCapital Global and chairman of the board of directors of GigCapital5. “GigCapital5 is our 5th SPAC and the GigCapital team is committed to working with exceptional teams of late stage, private companies to orchestrate the transition to the public markets and beyond in bettering the lives of the planet’s inhabitants, more so of minority and unprivileged communities.”

The business combination values QT Imaging at an equity value of $151 million and the combined company will receive approximately $41 million in gross proceeds from GigCapital5’s trust account. This is assuming there are no redemptions by GigCapital5’s public stockholders. Additionally, QT Imagining will get up to $26 million in additional financing to be raised prior to business combination closing. Currently, the transaction is expected to close in the first half of 2023.

SPACs were one of the hottest trends in 2020 and 2021, in part because of the pandemic, but have seen a major decrease in use in 2022. Because of the fluctuating environment for “blank check” acquisitions, SPACs have seen middling success in medtech, but not every company involved has recently given the merger type a gold star.

The Russian invasion of Ukraine, global supply chain issues, and what seems to be a looming cloud of recession on the horizon, many companies have labeled the merger type as too risky. In summer of this year, multiple companies even decided to mutually terminate planned SPAC mergers, citing unfavorable market conditions as the reason behind ending the deal. In April, Acecelus, a spine company, and CHP Merger Corp. ended a SPAC deal, and, also in early 2022, HeartFlow and Longview Acquisition Corp. did the same.

Some companies have seen success with SPACs. Pear Therapeutics is one of the more well-known success stories for the merger type in medtech, having closed on its SPAC in the second half of 2021 with a deal valued at $1.6 billion.

However, with the world economy on rocky ground, it’s unclear whether the once popular way of going public will make a comeback in 2023.