BeiGene announced the divestment of its subsidiary, Pi Health Cayman, responsible for data analysis business.
On the evening of March 5th, Baekje Shenzhou announced that in order to integrate and optimize the resource allocation and business objectives of Baekje Shenzhou and its wholly-owned subsidiary Pi Health, Ltd. (hereinafter referred to as "Pi Health"), Pi Health Inc. (hereinafter referred to as "Pi Health") plans to absorb and merge Baekje Shenzhou's wholly-owned subsidiary Pi Health Cayman at a jointly recognized valuation of $41.7984 million.
On March 6th, opening, BeiGene fell 0.94%.
Pi Health Cayman is a wholly-owned subsidiary of BeiGene established on March 9, 2021. Its main business is health technology research and development, providing FICS (front-end interoperability collection software) data analysis services to BeiGene. BeiGene is a commercialized biotechnology company that develops and commercializes innovative molecular targeted and tumor immunotherapy drugs for the treatment of cancer.
Although BeiGene initially established Pi Health Cayman to strengthen its data analysis and clinical research capabilities, BeiGene believes that the strategic priorities of the two companies have now diverged.
Pi Health Cayman provides services to a range of healthcare, biopharmaceutical, and research clients. BeiGene believes that these clients may view Pi Health Cayman as an extension of BeiGene at this stage. Due to concerns about competing pharmaceutical companies in data and intellectual property, Pi Health Cayman's customer base is limited. And the interaction between BeiGene and Pi Health Cayman regarding drug development, clinical trials, or data sharing may be subject to review by ethics committees or regulatory agencies. Due to various considerations, BeiGene has decided to divest Pi Health Cayman of its equity.
In addition, according to the 2022 annual report, BeiGene has a total of 48 subsidiaries, with a total of three companies engaged in health technology development, namely Pi Health Cayman, Pi Health USA, LLC, and B10 Health Technologies Private Limited. The majority of the remaining companies are engaged in medical and pharmaceutical research and production businesses.
Pi Health was jointly established by Geoffrey Kim, Bobby Reddy, Chao Liu, and Rajuli Lall (hereinafter collectively referred to as the "Founders") on August 25, 2023. The four founders mentioned above were all former employees of a subsidiary of BeiGene, with years of experience in the field of medical and health technology. Prior to this transaction, the company had not yet started actual operations and planned to develop software, analysis, and research solutions for the healthcare industry in the future.
As of January 31, 2024, Pi Health Cayman's consolidated unaudited total assets were $39.5 million, total liabilities were $17 million, and shareholder equity was $22.5 million, with unrealized income. With the approval of all parties, Pi Health has absorbed and merged Pi Health Cayman with a valuation of $41.7984 million. After completing the aforementioned restructuring of Pi Health, Pi Health plans to issue 29.3628 million shares of Class A preferred stock to investors, with a total subscription amount of $28.249996 million. The subscription price for these Class A preferred shares is $0.9621 per share.
A-class preferred shares, also known as the first round of preferred shares, have the right to priority distribution of company profits compared to ordinary shares. P& O Trust (a trust for the underage children of the Chairman and CEO of BeiGene, including Ou Leiqiang) plans to invest $5 million to subscribe for 5.197 million Class A preferred shares of Pi Health. P& O Trust is a related party to this transaction, and it has been confirmed that it maintains independence from BeiGene in terms of property rights, business, assets, debts, and personnel.
BeiGene has acquired 42.4056 million Class A preferred shares and 1.0394 million non voting Class A-1 preferred shares from Pi Health. In the future, BeiGene plans to transfer its 1.0394 million non voting Class A-1 preferred shares to RxCapital LLC at a price of $0.9621 per share. RxCapital LLC is a medical technology investment company established and existing under the laws of New Jersey on January 11, 2006, and is a preferred shareholder of Class A-1 in this transaction.
After the transaction, Pi Health's overall post investment valuation was $92.764 million, P& O Trust will hold 5.6% of the shares, while BeiGene will hold 45.71% of the shares. Among them, BeiGene holds less than 50% of the shares, and Pi Health's board of directors will be composed of 5 directors. BeiGene only has the right to appoint one director, so BeiGene cannot control Pi Health's operations, financial decisions, or major economic activities, and therefore cannot control Pi Health.
Although Baekje lost control of Pi Health Cayman after the transaction was completed, the company has not yet achieved profitability, and Baekje still holds shares in Pi Health Cayman. Pi Health will continue to provide health technology research and development services to Baekje at fair market prices.
At the same time, for the subsequent development of Pi Health Cayman, Pi Health will introduce external investors to jointly promote its further operations in software development, analysis, and research solutions in the healthcare industry.
Last month, BeiGene released its 2023 performance report, with a revenue of 17.423 billion yuan, a year-on-year increase of 82.1%; The net profit attributable to the parent company was -6.716 billion yuan, which narrowed the year-on-year loss. Baekje Shenzhou explained that the revenue growth was mainly due to the increase in sales of core market products, while the narrowing of losses was mainly due to a decrease in operating losses and a non operating income of $363 million obtained through BMS (Best Mercantile Squibb) arbitration settlement.
The core product referred to by Baekje Shenzhou above is the BTK inhibitor Zebutinib, which achieved an annual sales of 1.3 billion US dollars (9.138 billion yuan) in 2023, becoming the first domestically produced new drug with annual sales exceeding one billion US dollars. Driven by this product, BeiGene's losses narrowed significantly from 13.642 billion yuan in 2022 to 6.7 billion yuan.
However, in the past two years alone, BeiGene has accumulated a loss of 20.358 billion yuan. Moreover, according to the data disclosed by BeiGene, its cash, cash equivalents, restricted funds, and short-term investments have decreased from $4.54 billion (approximately RMB 32.684 billion) at the end of 2022 to $3.189 billion (RMB 22.958 billion) at the end of 2023.