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United States securities and exchange commission logo
September 3, 2022
Roderick Wong
Chief Executive Officer
Health Sciences Acquisitions Corp 2
40 10th Avenue, Floor 7
New York, NY 10014
Re: Health Sciences
Acquisitions Corp 2
Registration
Statement on Form S-4
Filed August 8,
2022
File No. 333-266660
Dear Dr. Wong:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement and Proxy Statement on Form S-4
Cover Page
1. Please revise your
cover page to disclose the valuation ascribed to Orchestra in the
business combination
and the number of shares to be issued at the closing to Orchestra
shareholders. In your
discussion of ownership percentages following the transaction,
please revise to
explain the effect of seeking shareholder approval for your Extension
Proposal and provide
context for the percentage of public shares that were redeemed in
connection therewith.
Frequently Used Terms, page 6
2. Although we do not
object to your use of a glossary, please revise to ensure that all
Roderick Wong
FirstName LastNameRoderick Wong
Health Sciences Acquisitions Corp 2
Comapany 3,
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defined terms are also defined at first use, and that your disclosures
are clear without
frequent reliance on defined terms or reference to other documents. As
examples only, it
is unclear why Outside Closing Date is a defined term when it is
defined as a specific
date, and the term "Alternative Transaction" is defined only by
reference to the merger
agreement.
Q: Why is HSAC2 proposing the Business Combination Proposal?, page 13
3. You state that the private warrants will become exercisable on the
later of 30 days after
the completion of your initial business combination and 12 months from
the closing of the
IPO, which you state elsewhere closed in August 2020. Please revise
here, and elsewhere
as appropriate, to clarify if the private warrants are currently
exercisable, and,
immediately after the business combination, will be exercisable for
New Orchestra
Common Stock.
Q: How will the Initial Shareholders vote?, page 16
4. We refer to your disclosure that the Initial Shareholders will vote
any shares they purchase
in the open market in or after the HSAC2 IPO in favor of each of the
Proposals. Please
revise your disclosures to explain how such purchases and votes, and
the ancillary
agreements related thereto, are in compliance with each of the
conditions set forth in the
Tender Offers and Schedules C&DI 166.01. As one example, we note the
C&DI states
that one of the conditions is that this registration statement would
state that any of your
securities purchased by the SPAC sponsor or its affiliates would not
be voted in favor of
approving the business combination transaction, but your disclosures
and agreements
indicate that all of your shares owned by them, including shares
purchased outside of the
redemption offer, would be voted in favor of the transaction. Your
disclosure also
indicates that the price paid could be at a premium to market price
and that there is no
limit to the price that could be paid.
What happens if a substantial number of the Public Shareholders vote in favor
of Business
Combination Proposal..., page 20
5. You state that in no event will HSAC2 redeem Public Shares in an
amount that would
cause your net tangible assets to be less than $5,000,001. Please also
include such
disclosure in the answer to the question "Do I have redemption
rights?" on page 17.
Redemption Rights, page 34
6. Please revise to explain the amount of funds from the trust account
used for redemptions
resulting from your seeking shareholder approval for your Extension
Proposal. In
addition, to the extent correct, please revise your disclosures
throughout your prospectus
as appropriate, including in this section, to explain that you
converted all of the assets held
in the trust account into cash prior to your shareholder meeting held
to seek approval for
your Extension Proposal. In this regard, we note that your proxy
statement circulated for
Roderick Wong
Health Sciences Acquisitions Corp 2
September 3, 2022
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the meeting stated, "[d]ue to this uncertainty [resulting from the
Investment Company Act
of 1940], HSAC2 intends to convert all of the assets held in the Trust
Account into cash
prior to the General Meeting," but that your disclosures in this
prospectus, including on
page 213 and in the last paragraph on page 216, indicate that your
trust account
continues to hold investment securities.
The Business Combination and Merger Agreement
Interests of Certain Persons in the Business Combination, page 36
7. You state that each of your initial shareholders have agreed to waive
their right to redeem.
Please describe any consideration provide in exchange for this
agreement.
8. Please add a bullet to disclose the total potential ownership interest
to be held by the
sponsor and its affiliates, including assuming the purchase of shares
through the Backstop
Agreement and conversion and exercise of all securities.
Summary Risk Factors, page 40
9. Please expand the seventh bullet to explain that Orchestra and New
Orchestra
have granted a security interest to the lender over all Orchestra's
assets, including
intellectual property.
10. Expand the eleventh bullet on page 41, as well as add a stand-alone
risk factor in the Risk
Factors section, to specifically discuss the risks and material
effects arising from the fact
that some patents for BackBeat CNT and CNT-HF expire as soon as 2025,
and that some
patents for Virtue SAB expire as soon as 2028. In addition, in the
section regarding
summary risks relating to the business combination, add a bullet to
discuss that you are
likely a PFIC, which could result in adverse tax consequences, as you
further discuss on
page 99.
Proposals to be Considered by HSAC2 Shareholders
Proposal 1: The Business Combination Proposal, page 120
11. When discussing the potential targets that HSAC2 exchanged term sheets
with you state
that you ceased discussions with Candidate Four on January 11, 2022 due
to accelerated
discussions between the Company and Orchestra. You also state that you
had
teleconferences and submitted draft letter of intent in March and April
2022 with
Candidate Three. Please state whether your discussions with Orchestra
beginning on
January 2022 had any effect on your dealings with Candidate Three as it
did with
Candidate Four. Also explain why the board determined not to pursue
discussions with
FirstName LastNameRoderick Wong
multiple parties on a simultaneous basis, and as you indicate that you
have a right to
Comapany NameHealth
appoint one personSciences Acquisitions
to the board Corp 2
of New Orchestra, please revise
Proposal 7 to clarify
which director was
September 3, 2022 Page 3 chosen by you.
FirstName LastName
Roderick Wong
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Health Sciences Acquisitions Corp 2
Comapany 3,
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2022 Sciences Acquisitions Corp 2
September
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D. Potential for a strong pipeline..., page 129
12. Please provide the basis for your statistic that as many as half of
the 26 million patients
worldwide suffering form heart failure suffer from a modified cardiac
neuromodulation
algorithm condition.
The Board's Reasons for the Approval of the Business Combination
B. BackBeat CNT Medtronic Collaboration..., page 129
13. You state that the Board believes the Medtronic Collaboration has the
potential to drive
global penetration into a greater than $10 billion annual commercial
opportunity. Please
revise to provide the basis for the Board's belief. In your revised
disclosure, please (1)
include the basis for your various statements that Orchestra is
expected to receive between
$500 and $1,600 per BackBeat CNT enabled device, but that BackBeat CNT
enabled
pacemakers are expected to be sold under existing reimbursement codes,
and (2) address
your statement on page 54 that your estimates of the HTN patient
population include
patients who are asymptomatic or in the early stages of disease and
who may never be
likely candidates for treatment with Orchestra's products and the
estimate of the market
size in the last paragraph on page 225.
Material U.S. Federal Income Tax Consequences, page 142
14. We note that your counsel's tax opinion will be filed by amendment. If
it will be a short-
form tax opinion, please revise to state clearly that the disclosure
in the tax consequences
section is the opinion of counsel. As it appears counsel is providing
a "should" opinion,
please revise to describe the degree of uncertainty in the opinion.
Refer to Staff Legal
Bulletin No. 19.
Unaudited Pro Forma Condensed Consolidated Combined Financial Information, page
153
15. Revise your narrative introduction here as well as your pro forma
footnotes to more
clearly disclose the extent to which the contingent earnout payments
have been reflected
in or excluded from your pro forma adjustments. Consider providing
disclosure in the
footnotes outlining the additional dilution that would be experienced
if the earnouts are
achieved, clearly identifying the extent to which such dilution has
been excluded from the
face of the pro forma presentation.
Business of Orchestra, page 220
16. Please generally revise your disclosures throughout your prospectus
regarding how
Orchestra's product candidates are designed to achieve certain end
results without
qualifications, such as, for example, your various statements in the
first paragraph on page
223, the first two paragraphs on page 226, and the first paragraph on
page 240, as these
types of statements are premature and imply efficacy, which can only
be determined by
the FDA and comparable regulatory authorities. We also note your
references to
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Health Sciences Acquisitions Corp 2
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"compelling" clinical data. While you may present the objective
results of trials, any
discussion of preliminary results should be sufficiently balanced with
disclosure of the
preliminary nature of such results, and should not imply efficacy. We
also refer to your
statement that Virtue SAB aims to be the "first-in-class" Sirolimus
AngioInfusion Balloon
to deliver extended focal release sirolimus during angioplasty. This
term suggests that the
product candidate is effective and likely to be approved by the FDA.
You may discuss
how your technology differs from technology used by competitors and,
as applicable, that
you are not aware of competing products that are further along in the
development
process. Statements such as these that you retain should be
accompanied by cautionary
language that the statements are not intended to give any indication
that the product
candidate has been proven effective or that it will receive regulatory
approval. Please
revise your disclosures accordingly.
Company, page 220
17. Please describe how Orchestra estimates a market opportunity of 3.2
million procedures
valued at approximately $3 billion for Virtue SAB. Please also revise
to provide the basis
for your claim on page 222 that HFpEF affects over half of the 64
million heart failure
patients worldwide.
18. You state that Orchestra will share meaningfully in the revenues
generated from
Medtronic's sale of BackBeat CNT-enabled pace making systems. Please
amend your
description of the Medtronic agreement on page 223 so that the
referenced percentage is
within a ten-percent range.
Product Pipeline, page 221
19. We refer to the last two rows in your table for SirolimusEFR. Based on
your disclosures
elsewhere, including on page 247, it does not appear that you have
selected target
indications for these product candidates yet. Given the early stage of
development for
these product candidates, as well as your limited disclosures
regarding these discovery
programs, it seems premature to highlight these products in the
pipeline table. Please
explain why these programs are sufficiently material to your business
to warrant inclusion
in your pipeline table or remove them.
20. Please revise the pipeline table to include columns for Phase 1, 2,
and 3 clinical trials or
otherwise provide additional information in your table to clearly
explain the phase of
regulatory review for each of the product candidates shown. We also
note that you
indicate that the next trials for BackBeat CNT and Virtue SAB will be
pivotal trials.
Please revise your disclosures as appropriate to explain why you
believe the next trial will
be pivotal when your disclosure on page 232 indicates that you have
not yet discussed the
Backbeat CNT study with the FDA and other regulatory bodies, and you
have similar
disclosures regarding the regulatory uncertainties for Virtue SAB,
including your
disclosures on page 75 that you have not even received confirmation
from the FDA that it
only needs to be approved as a combination product rather than needing
two separate
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approvals. Further, ensure the text under the pipeline table is
legible. Where applicable,
clearly identify the party sponsoring and conducting the upcoming
trial. In addition, we
note that you labeled the arrow for BackBeat CNT with the term "CE
Mark" but you state
elsewhere, including on page 232, that you do not intend to
commercialize the Moderato
system in the EU on its own. Accordingly, please remove the "CE Mark"
label or
otherwise clearly explain this information.
BackBeat Cardiac Neuromodulation Product Candidate (CNT), page 223
21. We note you provide p-values for the primary endpoint of the MODERATO
II study. At
first use, please provide a brief explanation of p-value, how it is
used to measure statistical
significance, and how it relates to regulatory approval.
22. Please further revise your disclosure in the second paragraph on page
226 to explain the
intended mechanism of the product candidate in terms a lay investor
would understand.
Preclinical Data, page 227
23. We note your figure labeled "Reduction in 24-Hr aSBP" includes a key
that identifies
which plot line refers to Baseline and CNT. Please amend to clearly
indicate which plot
line is which and expand the narrative disclosure to explain the
significance of the chart as
both lines appear to show a decrease.
24. Expand your discussion of the study described on the bottom of page
227 to clarify why
the treatment varied in duration for different patients.
MODERATO I Single Arm Study, page 228
25. Please revise to clarify the narrative disclosure describing the
graphics, and clearly explain
whether the co-efficacy endpoints were met. Additionally, clarify
whether baseline refers
to pre-implementation.
Clinical Results, page 243
26. Please revise to clarify whether the SABRE study's primary and
secondary efficacy and
safety endpoints were met, and who conducted the study. Please also
expand your
narrative disclosure to explain the significance of the information in
the graph and ensure
that the footnotes are legible. For this study and the Moderato
studies, please also disclose
any serious adverse events.
Intellectual Property, page 255
27. Please revise your intellectual property disclosure so that for each
technology, you clearly
describe the number of patents covering each type of patent
protection, the expiration of
each patent (or patent family), and the jurisdiction of each such
patent. In this regard, it
may be useful to provide this disclosure in tabular form to support
the narrative already
included, and clearly indicate which patents are licensed to your
partners. Please also
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2022 Sciences Acquisitions Corp 2
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revise your disclosures so that investors can use it to determine the
term of the agreements
with Medtronic and Terumo, as well as the end date of those parties'
revenue sharing or
royalty obligations. In addition, describe any material effects that
may arise from any
patents that are soon to expire.
Management after the Business Combination, page 289
28. Please revise the biographical descriptions of your directors and
executive officers to
more closely align with the information required by Item 401 of
Regulation S-K.
Orchestra's Management's Discussion and Analysis of Financial Condition and
Results of
Operations
Results of Operations, page 305
29. For each annual and interim period presented, please revise to provide
a breakdown of
your research and development expenses by product candidate. To the
extent you are not
able to track your expenses by product candidate, provide a breakdown
of such
unallocated amounts by the nature of the expenses.
Critical Accounting Policies and Estimates
Stock-Based Compensation, page 312
30. Revise this section to provide a tabular breakdown of the grants of
stock-based
compensation during 2022 through the date of the filing. For each
grant by date, quantify
the number of underlying shares, strike price, estimated fair value of
the shares used to
value the grant, and compensation recognized to date. Disclose the
methods used to value
the grants, including discounts applied as well as the extent to which
the business
combination was considered in reaching the valuation. Explain how the
valuation used
compares to the implied value given the exchange ratio in the merger
as well as the
preferred share issuances.
Consolidated Financial Statements of Orchestra Biomed, Inc.
Terumo Partnership Agreement, page F-47
31. Please revise your disclosure to address the following regarding the
revenues and
expenses related to the Terumo Partnership:
Revise Note 3 in Orchestra's annual and interim financial
statements as well as
Orchestra's Management's Discussion and Analysis (MD&A) to
quantify the
expenses related to the Terumo Partnership and clearly identify
the line items in
which they are reported.
You disclose here on pages F-47 and F-48 as well as on page 307
that changes in the
estimated total costs to complete the research and development
services resulted to
changes in the timing of your revenue recognition. Revise your
Note 3 as well as
page 307 to quantify the increases in the expected costs, identify
the reasons for the
increases, and discuss your expectations for future trends in this
area.
Roderick Wong
Health Sciences Acquisitions Corp 2
September 3, 2022
Page 8
Revise Note 3 to Orchestra's interim financial statements on page
F-76 as well as
Orchestra's MD&A to discuss the extent to which there were
additional changes to
estimated total costs experienced during 2022, and disclose any
resulting impact.
You disclose on page 64 that Orchestra did not meet certain
milestone timeline
requirements set forth in the Terumo Partnership. Revise Orchestra's
MD&A to
provide updates on the extent to which you are meeting and failing
to meet certain of
the timeline requirements, and identify any resulting financial and
logistical
impacts.
Exhibits
32. We note your discussions of the Integer Agreement, including on page 253.
Please
provide your analysis regarding whether or not this agreement should be
considered a
material contract in accordance with Item 601(b)(10).
General
33. We note that Chardan and Barclays were underwriters for your initial
public offering
and advised you on the business combination transaction with Orchestra.
We also note
press reports that certain financial advisors are ending their
involvement in SPAC
business combination transactions. Please tell us, with a view to
disclosure, whether you
have received notice from either of these institutions about it ceasing
involvement in your
transaction and how that may impact your deal or the deferred
underwriting compensation
owed to them for your initial public offering.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Christine Torney at 202-551-3652 or Kevin Vaughn at
202-551-3494 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Doris Stacey Gama at 202-551-3188 or Dorrie Yale at 202-551-8776 with
any other
questions.
Sincerely,
FirstName LastNameRoderick Wong
Comapany NameHealth Sciences Acquisitions Corp 2 Division of
Corporation Finance
Office of Life
Sciences
September 3, 2022 Page 8
cc:
FirstName Janeane Ferrari, Esq.
LastName