More than a month after the release of the 2023Q3 financial report, Gracell Biotech ushered in a privatization agreement. Zhitong Financial APP learned that on December 26, Gracell Biotech issued an announcement on its official website, announcing that it had reached an acquisition agreement with AstraZeneca.
Under the terms of the agreement, Gracell will receive US$2 per ordinary share (equivalent to US$10 per ADS) in cash and 0. per ordinary share$3 (equivalent to $1 per ADS.)US$5) for a total transaction value 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.
AstraZeneca's premium acquisition directly boosted Gracella's stock price on the day, and it ended up as much as 6026%。
Interestingly, on December 26, Burning Rock Medicine, a Chinese pharmaceutical stock that closed sharply, and on the 27th, the Hong Kong stock CARsgen also rose more than 8% intraday. Perhaps Gracell's "selling" this time has pointed out a new way out for the future of these two companies and even other unprofitable Chinese pharmaceutical stocks or Hong Kong stock 18A companies.
AstraZeneca what?
Regarding the transaction, AstraZeneca said on the 26th, "The $1.2 billion acquisition of Gracell Biotech is intended to complement AstraZeneca's existing capabilities and previous investment scale in cell**." "In fact, from the perspective of Gracella's business, it is easy to understand AstraZeneca's acquisition intention, that is, to target the general-purpose CAR-T market.
Globally, some of the major challenges faced by CAR-T** include low response rates in solid tumors, slow cell preparation, and high autologous costs. These problems have greatly limited the market accessibility of CAR-T cells** and affected the profitability of R&D companies at scale. As long as the above problems can be effectively solved, extremely high technical barriers can be established.
From this point of view, the R&D platform and products independently developed by Gracell are highlighted
Zhitong Financial APP has learned that Gracell has independently developed two major technology platforms, FASTCAR and TRUcar. Among them, the FASTCAR platform solves the problem of slow cell preparation, while the TruCAR platform technology is committed to solving the technical limitations of CAR-T autologous HD and receptor rejection of allogeneic T cells.
The key of the two technologies, FastCar and TruCART, is to improve the efficiency of T cell preparation from both time and space. In particular, the research and development of universal CAR-T cells is expected to smoothly separate cell preparation from the first cycle and "liberate" CAR-T cells from customized autologous strategies. This is also the basis for the industrialization and scale of the cell. The expansion of market accessibility means that the production schedule of cell preparation is expected to stabilize, which will help the company achieve a leapfrog cost reduction and efficiency improvement.
In addition, the clinical performance of Gracell Biotech's core product GC012F based on the above technologies also confirms the value of its technology platform.
Taking the first half of this year as an example, the research results of GC012F**RRMM and RR B-NHL were selected for the oral presentations of 2023 ASCO and EHA2023, respectively.
Specifically, during this year's ASCO, Gracell announced the long-term follow-up data of GC012F for refractory multiple myeloma (R r mm) and B-cell non-Hodgkin lymphoma (B-NHL) in the form of an oral presentation. The data shows that GC012F continued its strong performance with an overall response rate (ORR) of 931%, which means that the vast majority of patients respond positively to **.
At this year's EHA Annual Meeting, Gracell announced the clinical data of GC012F in 9 B-NHL patients who had previously received severe ** and presented high tumor burden in the form of oral presentation: **After 3 months, the ORR reached 100% and the CR rate was 78%;By six months, the CR rate was still at 67 percent. All of these patients belong to a very clinically challenging subtype of B-NHL dlbcl. The demonstrated clinical efficacy of GC012F in this indication may provide patients with a new ** option.
From AstraZeneca's point of view, other MNC companies such as Johnson & Johnson, Geelyde, Novartis and BMS all have in-depth commercialization in the CAR-T field, while AstraZeneca is developing slowly in this field.
However, some time ago, the FDA's biologics department was conducting further investigations into the risks associated with the possible development of secondary cancers by CAR-T cells**, which seemed to give AstraZeneca some "new ideas", because the CAR-T products named by the FDA are all traditional allogeneic CAR-T, and if AstraZeneca can make achievements in autologous CAR-T, it is expected to achieve overtaking in the corner.
Domestic biotech is about to start the "selling tide".
In fact, Gracell Biotech was acquired this time, and Burning Rock and CARsgen, which have positive feedback in the secondary market, are also worth paying attention to.
One of these two companies represents a Chinese pharmaceutical and medical device company, and the other represents a domestic CAR-T R&D enterprise, which corresponds to the two labels of Gracell. In addition, the common denominator of these three companies is that the company has a certain level of technology, but the financial net loss and the secondary market are in a low market capitalization state. Gracella's "sell-out" seems to have given these two companies a new "way out".
From the perspective of Burning Rock Dx, it is the leader in the domestic NGS genetic testing market, and the company has accumulated data in continuous testing, and has established ONCODB, one of the largest cancer genomic information databases in China. CARsgen also has certain technical barriers in the field of CAR-T research and development of solid tumors: the world's fastest growing CAR-T product for solid tumors is CARsgen's CLAUDIN 182 product CT041, clinical trials for gastric cancer and pancreatic cancer have entered confirmatory phase II.
However, from a financial point of view, like Gracell, Burning Rock and CARsgen are also in a loss-making state.
According to the 2023 interim report disclosed by CARsgen, in order to further promote the R&D process in the pipeline, the company's net loss for the current period increased by 75% to 40.4 billion yuan. Burning Rock is also currently in a loss-making state, and the net loss in Q3 this year reached 17.5 billion yuan, with the company's current cash reserves of less than 700 million yuan, if it continues to lose money, if it does not carry out the next step of financing, it is still unknown whether the funds on its books can support the commercialization of the product.
From the perspective of the secondary market, due to the conservative global pharmaceutical investment, the valuation of Biotech has been severely suppressed due to the lack of hematopoietic ability, and both Gracell Biotech, Burning Rock Dx and CARsgen have been affected by the "capital winter".
If the previous path is followed, the above companies are only expected to achieve valuation reversal to help investors make money after they survive to large-scale commercial profitability, but now Gracell has given an "unenvisioned path".
As the first Chinese biotech company to be acquired by MNC in the secondary market. Gracell will eventually have a transaction consideration of up to 11 per ADS$50. This will allow the primary market investment institutions and secondary market private placement institutions behind Gracell to all exit profitably.
Judging from Gracell's financing history, its cumulative financing amount reached 5$5.5 billion, of which the company has raised a total of 3 rounds of financing before the IPO of the U.S. stock market, and the average cost to investors is 3$60, of which Series C investors** are about 1. per share of common stockAt $64, it was AstraZeneca's premium acquisition that helped Gracell achieve a profitable exit from all primary investors. This is undoubtedly a typical example for other domestic biotechs, but as mentioned above, the premise of "selling a decent body" is that the company needs to have differentiated innovative technologies that are urgently needed by MNC and have a leading schedule, which is also a high threshold for most domestic biotechs.