Another case of overseas pharmaceutical companies' purchase of innovative Chinese drugs has been added.
On the evening of August 9th, multinational pharmaceutical company Merck announced that it will acquire a new, in research and clinical stage bispecific antibody CN201 from Tongrun Biopharmaceutical for the treatment of B-cell related diseases through its subsidiary. Merck stated that the transaction is expected to be completed in the third quarter of 2024 and recorded as an asset acquisition.
The Securities Daily reporter noticed that since AstraZeneca acquired Genshin Biotech at the end of last year, multinational pharmaceutical companies have repeatedly extended "olive branches" to Chinese innovative pharmaceutical companies through acquisitions and other forms of cooperation in the first half of this year.
Overall, the research and development efficiency of innovative drugs in China is ahead of the world. At the same time, due to the existence of exchange rate differences, for foreign-funded enterprises, 'adding' Chinese innovative drugs is a more 'cost-effective' business choice compared to their own research and development, "a primary market investment manager told Securities Daily reporters.
Enterprises that are "added for purchase" need to have three "characteristics"
Tongrun Biopharmaceutical is a clinical company that develops bispecific antibodies and antibody drug conjugates for the treatment of cancer through internal research and external collaboration.
CN201 is a novel bispecific antibody targeting CD3/CD19, aimed at mediating T cell activation and clearing B tumor cells. According to the terms of the agreement, Merck will make a cash down payment of $700 million through its subsidiary to acquire all global rights to Tongrun Biopharmaceutical CN201. In addition, based on the development and approval of CN201, Tongrun Biomedical will also receive a milestone payment of up to $600 million.
In response to this, the aforementioned investment manager stated that in relatively mature capital markets overseas, mergers and acquisitions are the main option for listed companies to rapidly expand their business, consolidate their foundation, and effectively boost their stock prices.
He further explained that compared to domestic enterprises, foreign-funded enterprises are more proficient in the M&A process and overseas market M&A financing is also more convenient.
Currently, mergers and acquisitions, licensing out, or collaborative research and development have become important paths for innovative pharmaceutical companies to solve financing difficulties and achieve sustainable development. So, which type of enterprise is more likely to become a target for multinational pharmaceutical companies?
Qu Rong, the general manager of mergers and acquisitions at Dongfang Gaosheng Pharmaceutical, told Securities Daily reporters that innovative pharmaceutical companies need to have three "characteristics". Firstly, they need to have an international perspective. From product approval, they need to achieve global leadership, not just domestic leadership, and have certain differentiated competitive advantages; The second is to have excellent clinical or preclinical data, which is more conducive to potential partners making judgments, and the quality of the data also determines the potential transaction scale foundation; Thirdly, an international R&D team, which is more familiar with the rules of the international market and produces products that are in line with the international market, is also conducive to promoting future cooperation.
Nanjing Sandieji Pharmaceutical Technology Co., Ltd. has had project cooperation with multiple foreign pharmaceutical companies. Dr. Cheng Senping, the founder and CEO of the company, told reporters that when selecting cooperation partners, foreign pharmaceutical companies have a standardized evaluation system applicable to themselves. "Each company will evaluate whether the other's technology, products, team, etc. can create value for it based on its own strategic goals
She further added that details such as the company's research and development quality system, confidentiality system, and understanding of drug making may be one of the indicators for foreign pharmaceutical companies to consider cooperation partners. Only by gaining the recognition of the other party in all aspects can we push small cooperation into big cooperation, and even achieve more possibilities for cooperation in the future
More diversified forms of cooperation
Recently, multinational pharmaceutical companies have repeatedly "added" domestic innovative drug companies, which has attracted market attention.
At the end of December 2023, Genki Biotech was acquired by AstraZeneca for $1.2 billion, marking the first complete acquisition of Chinese biotech. In 2024, the number of acquisition cases continues to increase. In January, multinational pharmaceutical company Novartis announced the acquisition of Sinopharm, which resulted in the overall merger of Sinopharm into Novartis China; In March, US listed company NuvationBio announced the acquisition of Baoyuan Pharmaceutical; In April, Danish biotechnology company Genmab announced the acquisition of Pufang Biotechnology.
It is worth noting that the above-mentioned case of multinational pharmaceutical companies acquiring equity in Chinese innovative pharmaceutical companies is aimed at acquiring the research and development pipelines of innovative pharmaceutical companies. Unlike in the past, Merck's collaboration with Tongrun Biopharmaceuticals involved the direct acquisition of the clinically developed bispecific antibody CN201 from Tongrun Biopharmaceuticals.
Qu Rong told Securities Daily reporters that pipeline acquisition and equity acquisition are different ways for multinational pharmaceutical companies to obtain pipelines of products under development, and therefore have different impacts on both parties in the transaction.
If the method of acquiring equity of innovative pharmaceutical companies is adopted, the shareholders of innovative pharmaceutical companies can obtain investment returns to achieve exit; the management team of the company may lose the decision-making power of future company strategic direction. However, if the method of pipeline acquisition is adopted, the original shareholders of innovative pharmaceutical companies cannot exit, but the company can receive cash support to support the research and development of more new varieties; the management team can decide the future strategic direction of the company. "Qu Rong further introduced.
In fact, different acquisition methods have different requirements for the buyer's strength.
If it is a pipeline acquisition, the buyer must have strong R&D and post commercialization capabilities to ensure the continuous integration ability after the acquisition. At the same time, the risk of pipeline acquisition will be relatively greater. If the product fails, the acquisition will completely fail. Equity acquisition, on the other hand, can obtain all the rights and interests of all product pipelines, as well as an excellent R&D team. In case of a single product R&D failure, there is also a chance that other varieties may eventually succeed, and mergers and acquisitions may go against the wind. "Qu Rong explained.