Gracella's wave of "selling" has opened up a new idea for Hong Kong stock Biotech, that is, companies with technology can seek MNC acquisition to alleviate financial pressure and commercialization pressure, which has also triggered the recent stock price of many Biotech companies. For example, the news of AstraZeneca's acquisition of Gracell Biotech pushed the Hong Kong stock Jacobio out of six consecutive declines, and the stock price began to **. On December 28, the share price of Jacobio (01167) rose by 731%;In the U.S. stock market, Conrad Biotech closed up for three consecutive days from December 26 to 28, with the highest intraday increase of 18%.
In fact, taking stock of the achievements of domestic biotechs going overseas in 2023, or the experience of rejection and return of rights, it is not difficult for investors to understand the importance of opening up different development paths for biotechs.
Borrow a boat to go to sea and take a shortcut out of the "cold winter".
Looking back on the development of the domestic pharmaceutical industry in 2023, it is not difficult to see that although the overall market "warming" signal continues to increase as the overall medical insurance policy enters the optimization stage, it is undeniable that the cold winter of the pharmaceutical industry in 2023 is still there.
In this context, through overseas authorized BD transactions, domestic innovative pharmaceutical companies can quickly withdraw funds and get out of the capital winter. It is in 2023 that a number of domestic blockbuster FDAs have been approved and billions of dollars of innovative projects have been authorized to overseas large BDs, opening the first year of breakthrough for innovative drugs to go overseas. For domestic innovative pharmaceutical companies, borrowing the "ship" of overseas markets to go to sea is already a shortcut out of the capital winter.
According to Zhitong Finance and Economics, in terms of licensing cooperation and BD transactions, so far in 2023, there have been nearly 60 innovative drug license out transactions in China, with a total disclosed transaction amount of more than 45 billion US dollars, of which the down payment has accumulated about 5 billion US dollars.
In the first half of this year alone, there were 17 domestic innovative drug projects going overseas, with a total disclosed amount of US$14.3 billion, more than three times that of the same period last year. From the perspective of buyers, Bristol-Myers Squibb (BMS), GlaxoSmithKline (GSK), AstraZeneca, BioNTech, Merck KGaA, Takeda and other MNCs have all reached a number of deals.
Among them, BioNTech has reached the largest number of authorized cooperation with domestic innovative pharmaceutical companies this year, with a total of 7 times, including 8 innovative drugs, and a total of 4$9.5 billion, with a total disclosed amount of 37$2.5 billion;BMS, on the other hand, relied on two transactions totaling 87500 million US dollars, becoming the number one buyer of domestic innovative drugs this year.
Among the BD trading projects, the ADC track deserves to be a hot spot this year. According to the data, from January to November this year, antibody drugs such as ADC accounted for 56% of license out transactions3%, and most of the transaction hotspots are concentrated in the early-stage R&D pipeline, of which the transaction volume of preclinical and phase I products accounts for nearly half.
In the fourth quarter of this year alone, there were more than 15 overseas licensing projects in China, involving companies such as Hengrui Pharmaceutical, Henlius, Legend Biotech, Baili Tianheng and Hansoh Pharmaceutical.
One of the most eye-catching is the cooperation between Baili Tianheng and BMS. On December 11, Baili Tianheng announced that it had reached an authorization cooperation with Bristol-Myers Squibb (BMS) to license the global rights and interests of the new EGFR HER3 ADC drug BL-B01D1 outside China to BMS, which also became the first new bispecific antibody ADC drug in China to successfully go overseas. With an upfront payment of US$800 million and a potential total transaction value of US$8.4 billion, the cooperation broke the record of a single project of a domestic innovative drug going overseas.
This year, in addition to the big hit of ADC, it is also blooming in other tracks.
For example, on December 28, Elpiscience announced that it had entered into a co-development and licensing agreement with Astellas for the BIME (bispecific antibody macrophage engager) platform and drug candidate ES019, which will result in an upfront payment of US$37 million and a potential transaction value of more than US$1.7 billion, setting a record for the largest transaction volume of a domestic antibody going overseas this year.
In the field of CAR-T, Legend Biotech and Novartis reached a collaboration on Legend Biotech's DLL3 target CAR-T** in November this year. Legend Biotech will receive an upfront payment of $100 million, with additional milestone payments10$100 million, with a total transaction value of up to 11$100 million.
But "borrowing a boat to go to sea" is not the only option.
Although the cooperation with MNC to "borrow a ship to go to sea" is frequent, the number of "capsizing incidents" such as the passive "withdrawal" of license-out projects is also increasing. Taking 2023 as an example, in the first half of the year alone, 7 domestic innovative drug licenses-out will be returned and transferred, while the number of domestic innovative drugs will reach 10 for the whole year, involving a number of biotechnology companies such as InnoCare, Jacobio, Columbus and Cnlinko Pharmaceutical.
On February 15 this year, Biogen announced the termination of its cooperation with InnoCare in the BTK inhibitor orelabrutinib project and returned the global rights to the product to InnoCare. Affected by this negative news, on the day of the announcement, the stock prices of InnoCare A shares and Hong Kong stocks were **1837% and 2734%。In addition, Da Mo also released a research report to lower InnoCare's 2023-2025 revenue** by 14% to 22%, while lowering its target price.
In July this year, ABBVIE terminated its licensing cooperation with Jacobio and returned its rights to commercialize SHP2 inhibitors, and in May, EQRX announced that it was terminating cooperation with two Chinese pharmaceutical companies, including Hansoh Pharmaceuticals and Cnlinko Pharmaceuticals, and abandoned all project pipelines except lerociclib, laying off nearly 60% of its workforce.
As mentioned earlier, this year is a hot year for the ADC track, so once there is an event of MNC returning rights, it will also become a hot topic in the industry.
In October this year, Merck announced the termination of the exclusive license to develop, manufacture and commercialize a preclinical ADC asset licensed to it by Columbotec, and waived the exclusive option of another preclinical ADC asset while returning one preclinical ADC product. This directly led to the stock price of Columbotai after the resumption of trading on October 24, and the intraday decline once reached 1387%, the lowest share price of 62 Hong Kong dollars also refreshed the new low since the second half of this year.
However, it is worth mentioning that so far, although there have been more than double-digit "returns" of domestic innovative drugs, the proportion of those that have been returned due to poor drug efficacy and safety is relatively small. For example, EQRX terminated its cooperation with two domestic innovative pharmaceutical companies because EQRX was acquired by Revolution Medicines through a full transaction, and the company's original cooperation was terminated.
In fact, on a global scale, BD returns are a normal thing. According to Zhitong Finance and Economics, there were 71 returns in the global biopharmaceutical industry last year, of which 60 were innovative drug projects. But this also shows from a realistic point of view that going overseas is not a sure profit or loss for biotech, but a bright double-edged sword.
In contrast, Gracell Biotech was acquired, and a case of MNC "holding hands" with domestic biotech opened up ideas for other peers.
On December 26, Gracell announced on its official website that it had reached an acquisition agreement with AstraZeneca with a total transaction amount of up to US$1.2 billion. Based on Gracella's ** price on December 22, the premium of AstraZeneca's acquisition is more than 60%. As a result, Gracell has become the first domestic innovative pharmaceutical company to be fully acquired by a multinational pharmaceutical company.
This case is not a small case for many biotech investors who have been "trapped".
On the one hand, the advantages of MNC in financial strength, product industrialization and commercialization have emerged, which can make up for the shortcomings of Biotech in these fieldsOn the other hand, AstraZeneca's purchase price of Gracell will allow the primary market investment institutions and secondary market private placement institutions behind Gracell to exit at a profit. This is compared with the previous requirement for enterprises to develop products on the market step by step or "borrow a ship to go to sea", the benefits of directly "selling themselves" obviously outweigh the risks.
From the perspective of MNC, almost all MNC will face the pressure of patent cliff in the next few years, and the cost of trial and error of new drugs will become more and more a heavy burden, which may make domestic innovative pharmaceutical companies go overseas to a polarized road. For example, some mncs that cannot withstand the pressure of the market may terminate more license out transactions due to their own problems, but some mncs that are on the rise may accelerate the pace of acquiring domestic innovative pharmaceutical companies with certain products in order to promote the launch of products as soon as possible and seize the market. These variables will also enrich the future overseas options of domestic biotechs.