There was a historic scene in the biomedical track: the first Chinese biotechnology company to be wholly owned by a multinational pharmaceutical company appeared.
Recently, AstraZeneca announced that it has reached an agreement with Gracell Biotech, a cell ** company, to acquire the latter with a down payment of US$1 billion and a total price of US$1.2 billion (about RMB 8.5 billion).
Gracell Biotech is a NASDAQ-listed Chinese biotechnology company founded by Cao Wei, the current chairman and CEO, and the second publicly traded company he co-founded. Prior to this, there had never been a similar M&A case in China, and more domestic enterprises cooperated with multinational pharmaceutical companies in the form of license-out.
It is worth noting that the transaction value of US$1.2 billion is a 100% premium to Gracell's previous market capitalization of less than US$600 million. The primary market investment institutions behind it, such as Temasek, Eli Lilly Asia**, Tonghe Yucheng Capital, Suzhou Private Investment Group, Wuyuan Capital, Vivo Capital, etc., successfully completed their exit.
Whether it is a case of cross-border mergers and acquisitions or a new path to exit, this time is a shot in the arm, at least proving that Biotech can bring real money to the DPI. A healthcare investor commented.
From Fudan to Harvard
Post-50s doctors supported two IPOs
The story of Gracell Biotech is inseparable from its founder, Cao Wei.
Cao Wei was born in 1958 and was admitted to Fudan University the year after the college entrance examination resumed. After that, he received his Ph.D. from Virginia Medical College, and then worked as a postdoctoral researcher at Harvard Medical School, and as an assistant researcher at the Center for Transplant Immunity at Stanford University School of Medicine.
Subsequently, Cao Wei moved from academia to business, and successively served as the technical manager of Bayer AG in Asia Pacific and the general manager of Ondax China.
In 2010, Cao Wei co-founded CBM, which became the first Chinese cell drug company to be listed on the NASDAQ four years later. Interestingly, Silbiman completed 1$200 million Series A financing, AstraZeneca also has AstraZeneca among investors.
After leaving CBM, Cao Wei became interested in the investment industry and joined Tonghe Yucheng Capital as an investment partner in April 2016. During this time, he was exposed to a large number of CART startup projects, which laid the groundwork for the future establishment of Gracell Biotech.
In 2017, the FDA successively approved the world's first two commercial products of CART cells**, which are known as the first year of immune cells in the industry.
After completing 4 rounds of financing in 4 years, Gracell Biotech successfully landed on the NASDAQ in the United States in 2021. On the day of listing, Gracell closed up 3189%, with a price of 25$06, the company's market capitalization once reached 16$400 million.
However, for innovative pharmaceutical companies, listing is not the end, and Gracell Biotech, which has clinical data but lacks hematopoietic ability, performs generally in the secondary market. Since then, the company's share price has been continuously broken, and as of April 28 this year, the company's share price is only 1 per share$74, the market capitalization has fallen by more than 90% from the time of listing.
AstraZeneca's acquisition at a premium not only drove up Gracella's share price by more than 60% on the same day, but also closed up other Chinese pharmaceutical stocks.
A decent exit
Who made the money from this merger?The answer is almost all involved.
Before the IPO in 2021, Gracell Biotech had a round of financing almost every year, and VC and PE institutions followed suit many times.
In August 2017, Gracell received a Series A financing of US$10 million from Tonghe Yucheng Capital.
In August 2018, Gracell Biotech completed a $22 million B1 round of financing, of which Eli Lilly Asia and Suzhou Yipu each invested RMB 63 million, and Chengdu Miaoji invested RMB 12.6 million.
In February 2019, Gracell Biotech completed an $85 million Series B2 financing round with participation from investors such as Temasek, Eli Lilly Asia**, Tonghe Yucheng Capital, and Suzhou Private Investment Group.
In 2020, the company received another US$100 million Series C financing, led by Wellington Asset Management, OrbiMed and Wuyuan Capital, with Vivo Capital as a new investor, followed by existing shareholders such as Temasek and Eli Lilly Asia**.
Based on this calculation, the cost per ADS of Gracell Biopharma's four rounds of financing is about 1$52, $506 USD, 5$3, $8$18. In this M&A transaction, shareholders received $10 per ADS**, which means that all investors in the primary market have been rewarded, exited, and obtained DPI.
At the time of its listing on the NASDAQ in 2021, Gracell raised 2$0.9 billion, at a cost of approximately $19 per ADS.
In August this year, Gracell Biotech won another 1$500 million private placement, led by Vivo Capital, with $100 million deal** at a cost of 3$60, $50 million warrants cost $5 per ADS per share$58.
Some investors commented that Vivo Capital, as the first allotment institution this year, may be the biggest beneficiary of this transaction, which has risen nearly three times in just four months, even surpassing the B and C rounds of investment institutions. The only losers were IPO cornerstone investors who were above the M&A price**.
The reason why this deal is interesting is that in addition to refreshing history, it also allows the VC PE institution behind China Biotech to see a path to exit with dignity outside the IPO. Putting aside external factors such as geopolitics and policies and regulations of different countries, this transaction proves that it is feasible to "sell" domestic listed companies to multinational pharmaceutical companies, although it is difficult.
Multinational companies sweep goods
The great era of China's medical M&A
It is a fact that the strength of China's biotech is being seen by the world.
An investor familiar with biomedicine told the investment community that the key to Gracell's M&A deal is that the pipeline is good enough and the clinical data is outstanding.
The acquisition highlighted in this acquisition is Gracell Biotech's GC012F. This is a dual-target CAR-T** targeting BCMA and CD19, covering a variety of hematological malignancies and autoimmune diseases, and the fastest progress** Refractory multiple myeloma (RRMM) is in Phase 1B 2 clinical trials in the United States.
From the perspective of the global M&A market, M&A in the biopharmaceutical industry has taken the lead in recovery this year, with the transaction value increasing by 9% to recover to $410 billion, and the total transaction value is very close to that of the technology industry, which is the largest M&A industry. Industrial buyers accounted for all the new activity in healthcare M&A.
At present, China's scientists and pharmaceutical innovation are at the forefront of the world, and excellent enterprises and projects will continue to appear, at least in terms of early research and development, which have reached the level of participation in the Olympic Games, and now they need the help of external resources to provide capital support to participate in the Olympic Games with a better attitude. Chen Bing, vice president of AstraZeneca China and head of international business development cooperation and strategic investment, once said that there are two things in the pharmaceutical market that have no borders: one is science, and the other is capital.
In fact, this year is a representative year for China's biotech to go global, and multinational pharmaceutical companies have repeatedly "swept up" in the Chinese market, and the most obvious data is that license-out transactions** have reached new highs.
According to the data released by PharmaCube on December 21, 2023, in 2023, there will be nearly 70 license-out transactions of innovative drugs in China, with a total disclosed transaction value of more than US$35 billion, with a year-on-year increase of 75% and 40% in volume and value, respectively.
From license-out to M&A by multinational pharmaceutical companies, a healthy capital market should have diversified exit and commercialization paths, and the industrial logic and active cycle of China's biotech M&A are becoming more and more in line with the global market. "This requires the invested companies to have a relatively high ceiling and have the opportunity to enter the global market. Tao Feng, founding partner of Boyuan Capital, said.
What is even more exciting is that there may be more similar cases in the future. Wang Haijiao, deputy general manager of Gaotejia Investment Group, said, "The mainstream exit method was IPO before, and now it will be mergers and acquisitions. At the past Qingke annual meeting, Zeng Zhiqiang, the first managing partner of Huagai Medical, shared that when there are more and more cases of listed companies being acquired and merged, it shows that the industry has really come to an attractive situation, and industrial integration is promising.
From the perspective of historical experience, the more in the period of industry change, the easier it is to produce great opportunities.