In the face of the olive branch thrown by the management, even if it encounters a realistic dilemma, more and more biotech still choose to refuse to "sell themselves", and behind the smoke of gunpowder, it is often full of realistic and opportunistic games.
The cold winter is becoming more and more severe, both in the economic and physical sense.
At a closed-door meeting held not long ago, an academician warned the reality: at present, many domestic biotech are in a critical period of R&D pipeline advancement, and if the progress is stagnant due to lack of money and falls behind competitors, it will be difficult to regain the lost market share in the future.
In fact, the efficacy of PD-1 in China is no worse than that of drug O and drug K, but the market just can't get into it, so we can only hope for new policies. The same goes for medical devices, GPRS (GE, Philips, Roche, Siemens) occupy the position, and it takes a lot of effort to get in later. The academician said.
Money has become the biggest pain point for biotechs, and it is also the key to determining whether they can survive. In the autumn of critical survival, many biotechs that were previously cautious about financing expansion had no choice but to extend an olive branch to capital.
However, capital is not charity, and there is no guarantee that it will operate well and push the pipeline forward after taking over. Although there is a lot of good news about the success of license-out in the second half of this year, there is another side to the coin: the low price** will either change hands, or the company will be dismantled and sold for nothing. There are even some investors with an opportunistic mentality, looking for targets everywhere, making "insulting" bids, and buying them to make a pure profit, and not losing money if they can't buy them.
This kind of situation exists all over the world, but because of the serious involution, many targets, and excellent assets, the situation is particularly serious in China. For biotechs, the capital in the cold winter is like a cup of poisoned wine in the desert at the moment, if you don't drink it, you will "die", and if you drink it, you will "die". How should they deal with this dilemma?
Biotechs who "straighten their waists".
In the downward cycle, it is common for biotech to sell itself. This year, AbbVie acquired Immunogen for $10.1 billion and Cerevel Therapeutics for $8.7 billionBristol-Myers Squibb's $4.8 billion acquisition of Mirati;Italian pharmaceutical company Alfasigma acquires Intercept Pharmaceuticals ...... for $800 million
All this makes those biotechs who "straighten their waists" stand out.
For example, the recent much-discussed takeover offer for LianBio is a typical example. In early December, LianBio received a takeover offer from Concentra Biosciences, controlled by Tang Capital Partners, including at 4. per shareUS$30 cash transaction for LianBio, Concentra entitled to 80% of the net proceeds of any project of LianBio in the U.S. and China, among others.
At that time, whether the acquisition could be achieved became one of the hot topics in the industry. A few days later, the answer emerged: LianBio believed it was "undervalued" and simply chose to refuse.
Notably, Concentra's offer to LianBio includes a provision that at the time of closing, LianBio will need to own at least 5$1.5 billion in cash and cash equivalents.
Some analysts believe that Tang Capital's series of actions are closer to the behavior pattern of corporate raiders, and to put it more bluntly, they are running for cash. This model takes advantage of the misinformation and mistrust between management and shareholders: management tends to continue to burn cash and wait for turnaroundsShareholders believe that the clinical pipeline is already negative value and are eager to cash out. At this time, the corporate raider forcibly intervened, and was responsible for the "hard work" such as factory closure, layoffs, and liquidation, and after the company was successfully dismantled, a part of the cash compensation was given to shareholders and management, and the rest was kept for itself as compensation.
This is not an isolated case. This is not the first time that LianBio's acquisition proposal, Tang Capital Partners, has been rejected. In the first half of this year, Tang Capital made a takeover offer to ATEA Pharmaceuticals, which develops hepatitis C drugs, but the other party also chose to reject the offer on the grounds that it was "undervalued".
The last time Tang Capital was in the spotlight was on October 20 this year, when it announced the acquisition of a biotech company with a market capitalization of less than $100 million, Rain Oncology. Earlier, in March, Jounce Therapeutics, another star biotech company, had also announced that Concentra, a subsidiary of Tang Capital, had made an unsolicited, non-binding proposal to acquire 100% of its shares. The acquisition of Liantuo is actually the third time Tang Capital has made a move this year.
A few lucky people can withstand the pressure and wait for a better **. Not long ago, Carmot Therapeutics, a ** pharmaceutical company, also rejected a $1 billion acquisition and chose to apply for an IPO on its own, but within two weeks, it was sold to Roche for a milestone of $2.7 billion in cash + $400 million for shareholders. After all, selling an MNC like Roche can not only get a good price, but the other party is also likely to respect its research results more and continue to push the pipeline forward.
Of course, not all companies are so lucky. In April, ZymeWorks received a non-binding offer from All Blue Falcon FZE for a market capitalization of 7$700 million. But at the time, Zymeworks was not reconciled, and finally rejected the acquisition in a righteous manner, "The company's platform value is seriously undervalued, and the proposal lacks credibility and opportunism." ”
In fact, at the time of the offer, Zymeworks' market capitalization was hovering around $300 million, which was already more than double the market price. After missing out on this offer, Zymeworks is in an increasingly awkward position, not only with a lower market capitalization, but also with greater difficulty in financing.
However, some investors bluntly said to the manager of e-drug that it is difficult to reach mergers and acquisitions in view of the current domestic situation, because many Chinese biotech expectations are mostly benchmarked against the United States. However, in terms of the current situation, first of all, the vast majority of acquisition proposals cannot come up with so much money, especially the merger between Pharma and Biotech, which not only depends on Biotech's own product development and team strength, but also depends on whether it is consistent with Pharma's original strategy. After a series of frictions, there are very few cases that can be successfully negotiated.
If you have strength, you won't let people take advantage of loopholes
Combing through a series of recent cases, behind the increasing number of high-profile refusal to be acquired, a common signal is revealed: the negotiation cannot be achieved, the valuation is too low is just the appearance, and the real reason may also include the acquirer's "bad intentions".
Earlier, Sinovac's board of directors also bluntly rejected a tender offer, and the back-and-forth between the two sides revealed more information to the outside world.
At that time, Sinovac's Board of Directors declined the acquisition and filed Schedule 14D-9 with the U.S. Securities and Exchange Commission (SEC) detailing the reasons for its rejection of the Alternative Liquidity Tender Offer: Like LianBio, Sinovac's Board of Directors believes that the implied valuation of the Offer** is lower than the value of the Company's assets. And it also bluntly stated that the valuation method of alternative liquidity lacks credibility and the issuance** is not sufficient.
On this point, alternative liquidity is quite honest, admitting that there is no accurate way to determine the present value of Sinovac Biotech**. It also disclosed that no valuation has been conducted or commissioned and no independent financial adviser or other third party has been engaged to conduct any valuation analysis or provide any opinion on the value of the shares.
Perhaps stung by this "unseriousness", in addition to the courtesy response, Sinovac's board of directors even bluntly stated that the tender offer is an "opportunistic" attempt at alternative liquidity, that is, "by profiting from a very low purchase relative to its value, thereby depriving shareholders of the potential opportunity to realize the full long-term value of their investment in the company".
This is clearly a ticket play. Speaking of many proposals that try to acquire at a price lower than the company's book cash value, Yang Ming, who has long been well versed in capital operation behavior, said bluntly to the manager of e-drug. He likened this type of game to "** lake trick", in order to get a good price, it is normal for the two sides to constantly maneuver. But hitting ** so low has a little "insulting" meaning in it.
What's more, there are often "pits" in the relevant acquisition clauses. Sinovac's board of directors noted that the tender offer proposed by Alternative Liquidity could be modified for various reasons, which also laid the fuse for the failure of the acquisition. "There can be no assurance that the tender offer will be completed under the implication of Alternative Liquidity, or under the same terms and conditions, including, but not limited to, the Offer**. ”
There are many factors behind any acquisition. Yang Ming said that the acquisition is not only the relationship between an investor and a company, but also a game between the investment institution and the board of directors and all shareholders of the intended company. "The equity owner of the company is not the management of the company, but the shareholder of the company, and the representative of the shareholder is the board of directors of the company, mainly depending on the company's actual controller, major shareholders and other ideas. ”
In the cold winter, there are more and more such cases. In August this year, the manager of e-drug Rong found that the number of companies with negative value has increased from 0 in the past two years3% jumped to 201%, in other words, there were 180 listed biotechs in the world at that time with an enterprise value of less than 0. Now, another quarter later, the economic situation is still not improving, and it is expected that the differences in perception between managers and shareholders about the company's operations will increase.
In Yang Ming's view, the motive behind some of the takeover offers is to force the company's major shareholders to think about whether to change the company's future development strategy, whether to use the money on the books to move forward, or to liquidate the company and return the rights and interests to shareholders. "At present, it is more important to force everyone to think more about how to fundamentally operate the company's resources more efficiently as a good company and do something meaningful to create value for shareholders. ”
Whether an acquisition can be achieved in the end depends on whether "one is willing to fight, and the other is willing to suffer". Yang Ming said that whether it is selling goods, services, or equity, as long as both parties have the same understanding of the target and the expected pricing, the transaction can be facilitated. It is difficult to say whether the transaction is reasonable, who will take advantage and who will suffer, and some will even need a long time after the transaction to discern further value.
In the final analysis, the cold winter is the time to compete for internal strength, only the biotechs who are truly confident in the clinical value of their own products, and the management and shareholders can twist into a rope, will not be taken advantage of, can they stabilize the rhythm, maintain their dignity, and wait for the spring after the cold winter. Otherwise, they can only be forced to fall into the game of drumming and passing flowers and turning each other into leeks, and become outcasts of the times.
Yang Ming is a pseudonym).