References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Panacea Acquisition Corp. II. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to EcoR1 Panacea Holdings II, LLC. The following discussion
and analysis of the Company's financial condition and results of operations
should be read in conjunction with the financial statements and the notes
thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on January 14,
2021 formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering
and the sale of the Private Placement Shares, our shares, debt or a combination
of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from January 14, 2021 (inception) through June 30, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and subsequent to the Initial Public Offering,
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination. We generate non-operating income in the form of interest income on
marketable securities held in the Trust Account. We will incur expenses as a
result of being a public company (for legal, financial reporting, accounting and
auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2021, we had net loss $224,944, which
consisted of formation and operating costs of $226,693 offset by interest earned
on investments held in Trust Account of $1,749.
For the period from January 14, 2021 (inception) through June 30, 2021, we had
net loss $229,944, which consisted of formation and operating costs of $231,693
offset by interest earned on investments held in Trust Account of $1,749.
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Liquidity and Capital Resources
On April 9, 2021, we consummated the Initial Public Offering of 17,250,000 Class
A ordinary shares, which includes the full exercise by the underwriter of its
over-allotment option in the amount of 2,250,000 Public Shares, at $10.00 per
Public Share, generating gross proceeds of $172,500,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 545,000
Private Placement Shares at a price of $10.00 per Private Placement Share in a
private placement to Sponsor, generating gross proceeds of $5,450,000.
Following the Initial Public Offering and the sale of the Private Placement
Shares, a total of $172,500,000 was placed in the Trust Account. We incurred
$10,017,468 in Initial Public Offering related costs, including $3,450,000 of
underwriting fees, $6,037,500 of deferred underwriting fees and $529,968 of
other costs.
For the period from January 14, 2021 (inception) through June 30, 2021, cash
used in operating activities was $1,168,274. Net loss of $229,944 was affected
by interest earned on investments held in the Trust Account of $1,749, and
Payment of formation costs through promissory note by sponsor of $5,000. Changes
in operating assets and liabilities used $941,581 of cash for operating
activities.
As of June 30, 2021, we had marketable securities held in the Trust Account of
$172,501,749 (including approximately $1,749 of interest income and unrealized
gains) consisting of U.S. Treasury Bills with a maturity of 185 days or less. We
may withdraw interest from the Trust Account to pay taxes, if any. We intend to
use substantially all of the funds held in the Trust Account, including any
amounts representing interest earned on the Trust Account (less income taxes
payable), to complete our Business Combination. To the extent that our share
capital or debt is used, in whole or in part, as consideration to complete our
Business Combination, the remaining proceeds held in the Trust Account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had cash held outside the Trust Account of $670,808. We
intend to use the funds held outside the Trust Account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into Class A
ordinary shares at a price of $10.00 per share, at the option of the lender. The
shares would be identical to the Class A ordinary shares.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $10,000 for office space,
administrative and support services. We began incurring these fees on April 6,
2021 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and our liquidation.
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The underwriters are entitled to a deferred fee of $0.35 per share, or
$6,037,500 in the aggregate. 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.
We entered into a forward purchase agreement pursuant to which the funds
affiliated with EcoR1 Capital, LLC (the "forward purchase investors") have
agreed to purchase an aggregate of up to 2,500,000 shares (the "forward purchase
shares"), for a purchase price of $10.00 per share, or an aggregate of
$25,000,000, in a private placement to close concurrently with the closing of a
Business Combination. The obligations under the forward purchase agreements will
not depend on whether any Class A ordinary shares are redeemed by the public
shareholders. The forward purchase shares will be identical to the Class A
ordinary shares included in the Public Shares being sold in the Initial Public
Offering, except that they will be subject to certain registration rights.
The proceeds from the sale of the forward purchase shares may be used as part of
the consideration to the sellers in a Business Combination, expenses in
connection with a Business Combination or for working capital. This purchase
will be required to be made regardless of whether any Public Shares are redeemed
by the Public Shareholders and are intended to provide the Company with a
minimum funding level for a Business Combination.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies. At
June 30, 2021, we have not identified any critical accounting policies.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. We adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU
2020-06 did not have an impact on our financial statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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PANACEA ACQUISITION CORP. II 
