On December 26th, AstraZeneca announced that it would acquire Genxi Biotechnology for up to $1.2 billion to further advance its cell therapy platform.
The significance of this event is that it is the first complete acquisition by a multinational pharmaceutical giant of a Chinese innovative biotechnology company, which has attracted high attention in the industry. Will AstraZeneca trigger a wave of cross-border pharmaceutical giants' acquisitions in China?
Since the beginning of this year, the innovative drug cooperation authorization agreements reached between multinational pharmaceutical giants and Chinese biopharmaceutical companies have shown explosive growth, with active buyers such as AstraZeneca, BMS, and Merck. This momentum reflects that China's ability to develop innovative drugs is being recognized by global pharmaceutical companies.
A senior pharmaceutical market insider told First Financial reporters that the average working time of R&D personnel in Chinese innovative pharmaceutical companies is about 2-3 times that of their European and American counterparts. They spend more time, have extremely high work efficiency, and the returns they receive are also obvious.
The above-mentioned individuals stated that as more and more executives with work experience in multinational corporations have returned to China to start businesses in the past decade, Chinese biopharmaceutical companies have seen leapfrog development and have also gained more attention from multinational pharmaceutical giants. "These talents with work experience in multinational corporations have returned to China to establish companies. Although they were founded in China, they are no different from multinational biopharmaceutical companies, and their capabilities are not inferior to those of European and American companies."
A few years ago, the potential of China's biopharmaceutical industry was already recognized by multinational pharmaceutical giants. Authorization introduction and equity investment are common ways for multinational pharmaceutical companies to cooperate with Chinese biopharmaceutical companies. In 2020, Pfizer signed a product development cooperation agreement with newly established Shanghai Liantuo Biotechnology to expand its business in China, involving a funding scale of up to 70 million US dollars. Pfizer also invested $200 million in the biopharmaceutical company Cornerstone Pharmaceutical, purchasing a 9.9% stake.
In 2019, Anjin Corporation also acquired a 21% stake in Chinese cancer drug manufacturer BeiGene for $2.7 billion. BeiGene is responsible for the development and commercialization of over 20 marketed and experimental cancer drugs in China.
In contrast, AstraZeneca's layout in China has always been unique, which is closely related to the company's deep localization strategy. In 2019, AstraZeneca and CICC jointly established a global healthcare industry fund with the goal of raising $1 billion in funding. According to the progress announced by AstraZeneca in 2022, the total fundraising amount of the fund has exceeded RMB 3 billion.
There are also rumors outside that the separate operation of AstraZeneca's China business is also a strategic consideration of the company. Although AstraZeneca has never confirmed this possibility, the capital market believes that this strategy is still an option in the company's long-term plan.
From this perspective, the industry believes that the acquisition of Genxi Biotechnology may only be the beginning, and AstraZeneca will have more acquisition actions in China in the future. However, whether this will trigger a wave of acquisitions by multinational pharmaceutical giants of Chinese biotechnology companies remains to be seen.
"The strategy of purchasing a Chinese biopharmaceutical company as a whole, in my opinion, is a product of AstraZeneca's unique thinking and may not form a widespread trend among multinational pharmaceutical companies," a former executive of a multinational giant told First Financial News. "However, there is no doubt that this event will attract more attention from multinational pharmaceutical companies to Chinese innovative drugs."
Chen Zhi, co-founder and Chief Scientific Officer of Heyu Pharmaceutical, believes that it is difficult to predict whether there will be a wave of acquisitions after Genxi Biotechnology, as there are still difficulties in technology and practical operations. He believes that the R&D capabilities of Chinese biotechnology companies, differences in policies and regulations in different countries and regions, and geopolitical factors will all pose challenges to acquisitions.
The current acquisition of Chinese biotechnology companies is attractive in terms of valuation. Taking Genxi Biotechnology as an example, the current stock price of the company is still less than $10, a drop of over 70% from the high of $33 set in the early stages of listing in 2021. From the stock price perspective, AstraZeneca seems to have picked a bargain.
For Chinese biotechnology companies, even if they seem to be selling at a low price, from the current market environment, it may still be the best choice for enterprises at this stage, which may also become a path for many Chinese biopharmaceutical companies to seek imitation in the future.
"The outlook for the capital market in the coming years is uncertain, and for Chinese biopharmaceutical companies that have not yet gone public, financing will definitely be more difficult. Being acquired by multinational giants is an ideal path." A senior executive of a Chinese biopharmaceutical company listed in the United States told a reporter from First Financial News, "The outcome of Genxi Biotechnology is believed to be a direction that many other struggling listed companies are considering."
On the other hand, for multinational corporations, as many drug patents are about to expire in the next year or two, they are also eager to seek the next "money tree" that can fill the income gap.
David Preston, Managing Director of BFC Group, a biopharmaceutical investment company, told First Financial reporters: "Multinational pharmaceutical giants will continue to actively cooperate with Chinese innovative biopharmaceutical companies in the future, as their income will experience a cliff like decline after patent expiration. To fill the income gap after patent expiration, they will definitely seek cooperation opportunities, which will also provide Chinese innovative pharmaceutical companies with a lot of overseas licensing opportunities."
He also stated that compared to previous years, the valuation of Chinese biopharmaceutical companies is currently more reasonable, and by the middle of next year, overseas investment acquisitions or cooperation authorizations may become more active.