Who’s Behind the $10B Buyout of Legend Biotech? J&J or Another Pharma Giant?

Jul 13, 2024 19:05 CST Updated 19:05

Legend Biotech

Tumor Cell Immunotherapy Developer

Johnson & Johnson

Medical Device R&D and Manufacturer

The protagonist of a $10 billion-level M&A deal might be a Chinese Biotech! The entire pharmaceutical industry is already abuzz.

Writing | Runyu

Legend Biotech, or will soon fire the first shot of a billion-dollar M&A in China's Biotech industry. Who is the mysterious big buyer behind it? Could it be Johnson & Johnson, the pharmaceutical company with the largest global revenue?

Yesterday, according to a report by *The Wall Street Insider* citing an unnamed source, Legend Biotech received an acquisition offer and has hired Centerview Partners, the "top-tier" investment bank, to assist the board in reviewing the offer and related matters. The identity of the bidder remains unclear at this time.

Affected by this news, Legend Biotech's stock price surged over 12% as of the U.S. market close that day, with a market value reaching $9.911 billion.

Legend Biotech has become a potential blockbuster acquisition target in the eyes of many overseas investors. Recently, after Eli Lilly announced the acquisition of Morphic, BMO Capital Markets (Montreal) subsequently stated that it regards BioMarin, Legend Biotech, and a Nasdaq-listed company named Silence Therapeutics as the three most attractive acquisition targets going forward.

The commonality behind Bayer and Legend Biotech lies in their revenue base and low valuation.

BMO believes that Legend Biotech's BCMA CAR-T product, Cilta-cel (Carvykti), has the potential to generate peak sales of up to $5 billion for the company. Moreover, its market penetration in treating multiple myeloma (MM) from second-line to fourth-line therapies offers even greater room for imagination.

So, who would be the buyer behind Legend Biotech?

Market speculation suggests it could be Johnson & Johnson.

First, the two have a deep and mature cooperation,And there is no doubt that Johnson & Johnson highly recognizes Legend Biotech's CAR-T therapy. Joaquin Duato, the current Chairman and CEO of Johnson & Johnson, emphasized that the company's next driving forces come from three points, one of which is two key products—daratumumab and ciltacabtagene autoleucel.

By leveraging the successful partnership model with Johnson & Johnson, Legend Biotech has rapidly expanded the global reach of its core product, capturing dividends in a more lightweight manner. In its early days, Legend was not particularly "aggressive" in fundraising. Coupled with CAR-T’s relatively "niche and specialized" application field at the time and higher clinical thresholds, partnering with an MNC like Johnson & Johnson became the path to success for Legend. Later developments, whether in clinical development, production capacity layout, or commercial data, all proved the correctness of this collaboration.

In 2023, the sales of Cilta-cel exceeded $500 million, a year-on-year increase of 276%, surpassing several CAR-T products that were launched earlier and rivaling the sales of Kymriah, the world's first CAR-T therapy. For Cilta-cel, which was only approved in February 2022 and for later-line indications, this performance is quite commendable. In Q1 of this year, Cilta-cel's sales reached $157 million, marking a significant year-on-year increase of 118%. Based on this, as of Q1 this year, Legend Biotech had approximately $1.3 billion in cash.

All of these provided it with a strong bargaining position during its acquisition.

Secondly, Johnson & Johnson is highly ambitious and experienced in the layout of hematological tumors. Through a step-by-step "All in" approach in hematological tumors, it has made a leap from later-line to first-line treatments, forming an increasingly "monopolistic" treatment landscape for hematological tumors and successively creating blockbusters.

Especially in multiple myeloma, one of the three major core hematological malignancies, Johnson & Johnson’s layout is nothing short of "monopolistic" — with 1 small-molecule drug, 1 monoclonal antibody, 2 bispecific antibodies, and 1 CAR-T product. Most of these 5 products have demonstrated stunning efficacy, either seizing the first-mover advantage, proving to be the best-in-class, or rapidly covering treatments from later lines to frontline therapy, creating an aggressive encirclement.

The key is that, since last year, a signal Johnson & Johnson has been sending to the outside world is,Will continue to focus on the field of hematological tumors.

However, apart from Johnson & Johnson, could it be other major pharmaceutical companies?

This particularly depends on whether the acquiring party wants to quickly enter or consolidate its position in the CAR-T cell therapy and hematological tumor fields.

For example, one of AstraZeneca's key focuses is to become a new leader in the hematological oncology field, although this MNC has just acquired a Chinese Biotech. Another example is Roche, which in recent years has significantly invested in ADC, BTK, and CAR-T therapies, as if to further solidify the company’s position in the hematological oncology field.

But no matter who the acquirer is, based on the past experience of large pharmaceutical companies acquiring CAR-T enterprises, the price will not be low. Moreover, Legend Biotech's financial status, market prospects, technical strength, brand value, and industry position can already give it significant premium pricing power.

Moreover, another interesting aspect of this matter is that some media have reported,Legend Biotech’s hired investment bank, Centerview Partner, happens to be the facilitator behind AstraZeneca's acquisition of Gracell Biotechnologies at a 154% premium at the end of last year.Data shows that among the 23 biotech deals valued at over US$1 billion in 2023, Centerview Partners was involved in 19 of them, with core members having previously handled multiple mega-deals in the pharmaceutical industry worth over tens of billions of dollars.

In December 2023, AstraZeneca acquired Gracell Biotechnologies, marking the first acquisition of a local Biotech company; in January this year, Novartis acquired Sinovent Pharmaceuticals; in April this year, Genmab acquired Provention Bio. Following these transactions, with backing from a well-known investment bank, whether Legend Biotech will achieve the first-ever biotech acquisition in China's innovative drug history exceeding $10 billion is highly anticipated.

If Legend Biotech is acquired, it will once again validate the E Pharma Manager's profile of potential acquisition targets in China: a differentiated technology platform in a cutting-edge field, or a globally promising product pipeline focused on a specific disease area, or a single blockbuster product. The core team has a strong international background or mature and extensive international experience.

There is no doubt that we will witness history again at that time. However, if the acquisition is successful, it would only be the first step, and integration issues may follow. Whether the acquirer can complete the integration in the most professional manner remains to be seen.

First Trial | Huang Jia

Second Review | Li Fangchen

Third Review | Li Jingzhi

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