Johnson & Johnson Acquires Ambrx Biopharma for $2 Billion in All-Cash Deal, WuXi AppTec Emerges as Top Chinese Beneficiary

On March 7, Johnson & Johnson announced,The acquisition of Ambrx Biopharma, Inc. was completed in an all-cash deal with a total equity value of $2 billion and a net value of $1.9 billion after deducting the estimated acquired cash.

This acquisition was announced in January this year, with Johnson & Johnson acquiring all outstanding shares for $28.00 per share in cash, representing a premium of approximately 105% over the closing price. According to the industry media ENDPOINTS NEWS, the offer of $28 per share in this acquisition is about double the closing price of Ambrx Biopharma on Friday (January 5, 2023), and is almost on par with the tender offer price (based on overseas practices, to ensure the completion of a tender offer, the acquisition price offered is usually much higher than the normal trading price of the stock on the securities market, generally exceeding the market price by more than 20%).

This is Johnson & Johnson's first comprehensive acquisition of a biopharmaceutical company in recent years. Notably, the shareholders behind Ambrx Biopharma include a group of Chinese investors such as Hopu Investment and WuXi AppTec.

In 2003, Ambrx spun off from The Scripps Research Institute (TSRI). After more than a decade of development, Ambrx filed an application with NASDAQ, attempting an $86 million IPO. However, due to an undervaluation, the IPO was withdrawn. Subsequently, the company accepted a joint acquisition by a consortium led by Fosun Pharma, including Hopu Investment, Everbright Healthcare Fund, and WuXi AppTec, becoming the first U.S. high-tech biopharmaceutical company to be wholly acquired by Chinese capital.

After being acquired, Ambrx underwent a complete overhaul in terms of team, strategy, and direction. The main executives of the team are now primarily Chinese, including Ambrx Chairman Li Bing, appointed by Fosun Pharma, and Ambrx Chief Scientist Dr. Tian Feng. At the same time, Ambrx's collaboration with Chinese pharmaceutical companies has become increasingly close, having established partnerships with domestic pharmaceutical enterprises such as Zhejiang Medicine (NewCode Biopharma), BeiGene, and China Biologic Products in 2013, 2019, and 2020 respectively.

In terms of financing, Ambrx, which has been wholly acquired by Chinese capital, has become a "hot commodity."

In 2016, Ambrx raised 45 million US dollars in financing. The investors included Apricot Capital, Northeast Securities, Sinopharm Capital, Renfu Medicine, as well as existing shareholders Fosun Pharma, Hopu Investment, and Everbright Holdings.

In 2020, Ambrx completed a $200 million Crossover financing round, with new investors including Fidelity, BlackRock, Cormorant Asset Management, HBM Healthcare Investments, Invus, Adage Capital Partners, etc. Foreign investment began to flow into Ambrx.

In June 2021, Ambrx was listed on the New York Stock Exchange, issuing 7 million American Depositary Shares (ADS), raising 126 million US dollars, with the price of each ADS at 18 US dollars. According to the IPO documents, major shareholders holding more than 5% of the company's shares before the listing include:HOPU Investments (18.1%), WuXi AppTec (13.6%), FMR (8.5%) under Fidelity Investments, BlackRock (7.1%),Fosun Pharma（6.3%）、Cormorant（5.7%）HBM Healthcare（5.7%）。

However, by the end of March 2023, Fosun had exited the list of major shareholders of Ambrx. The positions of Hopu and WuXi AppTec remained largely unchanged, while foreign institutions including Darwin Global, Comorant, and Venrock significantly increased their holdings. In December last year, Hopu sold a total of 5,134,629 ADS (equivalent to 35,942,403 shares, accounting for 92% of its previous holdings), recovering approximately $68.7 million at an average price of $13.38 per ADS, perfectly missing out on the doubled premium from this acquisition.

WuXi AppTec has become the biggest winner among Chinese-funded companies. Public information shows that of the 29,267,687 shares held by WuXi, 38.3% were Series A preferred shares acquired from Hopu in 2020 (with an ADS cost of around $11), and 34.4% were Series B preferred shares of Ambrx purchased in 2020 (with an ADS cost of approximately $12).

Johnson & Johnson's ability to "boldly" pay for this acquisition in all cash is also due to its continuously growing core business. According to Johnson & Johnson’s Q4 and full-year 2023 earnings report, the company achieved $82 billion in sales for the full year of 2023, with a 6.5% increase in sales. The sales of its two focused businesses, pharmaceuticals and medical technology, both grew steadily.

In the past two years, Johnson & Johnson has demonstrated the fierce strength of a veteran MNC in the oncology treatment sector, with multiple bispecific antibody drugs achieving significant progress one after another.

In August 2022, Johnson & Johnson announced that the European Commission (EC) had granted conditional marketing authorization for teclistamab, a BCMA/CD3 bispecific antibody, as a monotherapy for the treatment of relapsed or refractory multiple myeloma (r/r MM), successfully launching the world's first approved BCMA/CD3 bispecific antibody.

On September 6, 2023, Johnson & Johnson announced that the Phase III MARIPOSA-2 study of Rybrevant (amivantamab), an EGFR/c-MET bispecific antibody, in combination with the third-generation EGFR inhibitor lazertinib and chemotherapy for the treatment of non-small cell lung cancer (NSCLC) patients who have developed resistance to osimertinib, achieved positive topline data.

In the just-passed 2023, ADC almost became a "must-contend-for territory" for every MNC. On one hand, the increasingly competitive ADC track has seen numerous impressive approvals and clinical data emerge. On the other hand, with the arrival of the ten-year patent period (such as Johnson & Johnson's blood thinner Rivaroxaban and AstraZeneca's Olaparib), many MNCs have either acquired heavily or maintained their prominent advantages in a certain field, or sought the next "blockbuster drug."

Johnson & Johnson is no exception. Last December, Johnson & Johnson signed a licensing agreement with LegoChem for a Trop2-targeted ADC for $1.7 billion, and also acquired a Phase III clinical ophthalmology gene therapy pipeline for over $400 million.

Ambrx, acquired this time, owns three ADC drugs in clinical stages, with ARX517 targeting prostate-specific membrane antigen (PSMA) becoming the core of the transaction. Building on innovation in oncology and prostate cancer, Johnson & Johnson’s scientists intend to collaborate with Ambrx’s researchers to accelerate the Phase 1/2 APEX01 study of ARX517 in advanced prostate cancer, while advancing the pipeline for new candidate products.

Not long ago, Ambrx announced the latest clinical data of ARX517 in the Phase 1/2 dose escalation and expansion clinical trial (APEX-01) for the treatment of metastatic castration-resistant prostate cancer (mCRPC). According to reports, ARX517 demonstrated significant PSA50 reduction and prolonged therapeutic effects at a dose of 2.0mg/kg. With no DLT (dose-limiting toxicity) or serious adverse events (SAEs) observed at 3.4mg/kg, the safety monitoring committee has voted to escalate the dose to 4.5mg/kg.

Notably, ARX517 is not the most clinically advanced pipeline of Ambrx. ARX788, which has already entered Phase II clinical trials, is an ADC targeting human epidermal growth factor receptor 2 (HER2) for metastatic HER2+ breast cancer.

Preliminary safety and efficacy data from the Phase II clinical study of Ambrx's ARX788 pipeline showed that, after treatment with ARX788, the objective response rate (ORR) was 57.1% and the disease control rate (DCR) was 100% in HER2-positive mBC patients who were resistant or refractory to T-DM1. Subsequently, Ambrx's stock price surged 10-fold, with its latest market value reaching $175 million.

The commercialization and development rights of ARX788 in mainland China belong to NovoCodex Biopharma, a subsidiary of Zhejiang Medicine. In May 2021, the National Medical Products Administration (NMPA) announced that the recombinant humanized anti-HER2 monoclonal antibody-AS269 conjugate (ARX788) for injection, developed by NovoCodex Biopharma under Zhejiang Medicine, was officially included in the Breakthrough Therapy Designation list, with the proposed indication being second-line treatment for HER2-positive advanced breast cancer. In February 2023, ARX788, jointly submitted by Zhejiang Medicine and NovoCodex Biopharma, received default approval to conduct Phase II/III clinical trials, intended for the treatment of gastric cancer and gastroesophageal junction adenocarcinoma.

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