On December 26th, multinational pharmaceutical company (MNC) AstraZeneca announced the acquisition of domestic biotech company Genxi Biotechnology. The latter was founded in 2017 and is a company that develops CAR-T (Chimeric Antigen Receptor T Cell Immunotherapy). It was listed on the NASDAQ stock market in January 2021.
According to both parties, shareholders of Genxi Biotechnology will receive cash of $2.00 per share (equivalent to $10.00 per ADS) of Genxi Biotechnology common stock upon completion of the transaction, plus $0.3 per share (equivalent to $1.5 per ADS) of non tradable contingent value equity (CVR) of Genxi Biotechnology common stock, with a total transaction value of $1.2 billion, including CVR.
Among them, the transaction value of the cash down payment is about $1 billion, which is 62% higher than the closing price of Genxi Biotech on December 22 this year and 154% higher than the 60 day volume weighted average price (VWAP) of $3.94 before the announcement. If the aforementioned down payment and potential contingent payments are made, the total transaction value is approximately 1.2 billion US dollars, which is 86% higher than the closing price of Genxi Biotechnology on December 22 this year and 192% higher than the 60 day VWAP.
The transaction is expected to be completed in the first quarter of 2024. If the transaction is completed, Genxi Biotechnology will be delisted from NASDAQ and continue to operate as a wholly-owned subsidiary of AstraZeneca in China and the United States.
As of the close of December 26th Eastern Time, Genxi Biotech's stock price was $9.920 per share, up 60.26%, with a total market value of $952 million.
The first Chinese biotech to be publicly acquired by MNC
It is worth noting that during the wave of innovative drugs going global in China in the past two years, compared to Biotech's previous focus on selling pipelines and technology licensing, this time Genxi Biotechnology is being acquired as a whole. It also became the first biotech in China to be acquired by MNC in the open market.
Prior to this, Genxi Biotechnology had raised funds almost once a year, including Series A in 2017, Series B in 2019, and Series C in 2020, with amounts of approximately RMB 70 million, USD 85 million, and USD 100 million respectively. The investors included well-known institutions such as Tonghe Yucheng, Lilly Asia Fund, Temasek Investment, and LAV Investment. Based on the disclosed number of shares, transaction price, and company ADS ratio, the per share ADS cost of these three rounds of financing exceeds $1, $5, and $8.18, respectively.
Afterwards, the company went public on NASDAQ in 2021 and raised an additional $209 million, with an ADS cost of approximately $19 per share at the time. As of August this year, Genxi Biotechnology has received another $150 million private placement, with an ADS cost per share of $3.60 for a $100 million trading price and $5.58 per share for a $50 million warrant.
Based on the acquisition of Genxi Biotechnology, shareholders received an ADS price of $10 per share. In addition to being much lower than the price level at the time of IPO, primary market institutions in the early stage and institutions participating in private placements this year have achieved profit exits, and the earlier they enter, the more profitable they will be. The profit level of institutions participating in private placement this year has also exceeded that of investment institutions in Series B and Series C.
In fact, in the more mature pharmaceutical ecosystem of the United States, the aforementioned acquisition and investor exit paths are more common. Meanwhile, the division of labor between Biotech and large pharmaceutical companies is also clearer. The former's competitiveness lies in innovative technology development, while the latter excels in later stage development and commercialization. Therefore, the fate of successful biotech is mostly to create valuable pipelines, which are then acquired by large pharmaceutical companies to complete later development, production, and sales. A typical case is Genentech, a subsidiary of Roche.
From the perspective of domestic biotech development, since 2015, a series of policies to encourage medical innovation, such as the reform of drug review, have been implemented. Domestic biotech has spent money on early financing and made rapid progress. Many companies have built their own production bases and commercialized teams. Until the last two years, the foam has subsided and the capital has cooled, so they have to save food for the winter. Currently, many biotech companies have awakened from the dreams of biopharma, becoming more pragmatic and focused on return on investment. From this perspective, the acquisition of Genxi Biotechnology has also opened up a new path for domestic biotech to continue its existence and find its positioning.
Why Genxi Biology Has Been Favored
Returning to this transaction, from the perspective of both parties, AstraZeneca's acquisition of Genxi Biotechnology aims to strengthen the field of blood tumors after aggressively entering the ADC (antibody conjugated drug) oncology field in recent years. Previously, AstraZeneca's flagship product in this field was the already marketed BTK inhibitor Acalabrutinib. In terms of CAR-T therapy, since Novartis' first global product Kymarih was launched in the United States in 2017, 8 products have been approved worldwide, all targeting hematomas with a focus on CD19 and BCMA.
The acquisition of GC012F by Genxi Biotechnology is highlighted. This is a dual target CAR-T therapy targeting BCMA and CD19, covering indications including various hematological tumors and autoimmune diseases. The fastest progressing recurrent/refractory multiple myeloma (RRMM) is currently in phase 1b/2 clinical stage in the United States.
At this year's American Society of Hematology (ASH) annual meeting, Genxi Biotechnology released data from an ongoing single arm, open phase 1 IIT (clinical trial initiated by researchers) of the drug. As of October 1st this year, the median follow-up time for 22 newly diagnosed patients with evaluable multiple myeloma (NDMM) was 18.8 months. After GC012F treatment, the ORR (objective response rate) was 100%, and the sCR (strict complete response rate) was 95% (21/22). Meanwhile, the drug has good safety, with only 27% (6/22) of patients experiencing low-grade cytokine release syndrome (CRS) as a side effect.
In addition to impressive data, AstraZeneca's acquisition of Genxi Biotechnology may also be due to its focus on its differentiated CAR-T technology platform, including the FasTCAR platform for autologous CAR-T, the TruUCAR platform for allogeneic CAR-T, and the SMART CART module for solid tumors. This all addresses the current issues with CAR-T therapy.
As a last line treatment drug, the waiting time for CAR-T to be applied to patients is usually very limited. But currently, CAR-T is "ready to use" and the production time in the industry is about 2 to 6 weeks. Therefore, shortening production time has become a pursuit of various companies, such as the T-Charge CAR-T production platform developed by veteran player Novartis. Genxi's FasTCAR platform is also working here, and the company claims that it can complete production the next day and provide better CAR-T cells. GC012F was developed on this platform. In addition, due to the characteristic of "one person, one medicine", CAR-T currently has no standardized production regulations, resulting in high prices. The TruUCAR platform is a universal allogeneic CAR-T platform developed to dilute production costs.
In addition, although AstraZeneca's progress in cell therapy is not as good as other pharmaceutical companies such as Novartis and Gilead, it has already established a presence in the CAR-T field. According to the Dingxiangyuan Insight database, AstraZeneca currently has pipelines such as C-CAR031 and AZD6422 entering the clinical stage. However, it is worth noting that the former targets liver cancer, while the latter targets gastrointestinal tumors.
This also reflects the current dilemma of CAR-T's "small market". After all, hematomas only account for 10% of new global cancers, while solid tumors are the larger market. With an increasing number of entrants and intensified competition, CAR-T companies have long been expanding into this field. However, in the past two years, CAR-T therapy has also begun to explore the second largest market for self immunity after tumors, such as companies such as Nanjing Reindeer and Yaoming Juno. GC012F is also used for autoimmune diseases, including systemic lupus erythematosus (SLE). The phase 1/2 clinical trial of GC012F for refractory SLE has been approved to commence in both China and the United States.
In fact, CAR-T has been on the market for less than 10 years and is still an emerging therapy. There is room for unknown and optimized aspects such as product side effects and production processes. For Genxi Biotechnology, in addition to GC012F, there are also multiple pipelines under research. Development risks, large-scale clinical costs in the later stage, and manufacturing difficulties are all issues that need to be considered. Under this, dedicating oneself to large pharmaceutical companies is a good choice. The previous case of Zhuyu is the collaboration between Legendary Biology and Johnson&Johnson in the global development of Cita cel, whose performance has far surpassed CAR-T Company, which has already launched products in China. Of course, this premise requires excellent clinical data, product efficacy, and safety.
In addition, there may be traces of holding hands with AstraZeneca. The aforementioned C-CAR031, which AstraZeneca is already promoting, is jointly developed by it and domestic biotech Sibyman Biotech. And Cao Wei, the founder of Genxi Biotechnology, has been deeply involved in the CAR-T field for many years. Prior to this, he was also the co-founder and CEO of Xibiman Biotechnology.