AstraZeneca Completes $1.2 Billion Acquisition of Gracell Biotechnologies

On February 22, Gracell Biotechnologies Group (hereinafter referred to as "Gracell" or "the Company") officially announced the completion of the previously announced merger agreement with AstraZeneca Group.Gracell, AstraZeneca Treasury Limited ("Parent Company"), and Grey Wolf Merger Sub ("Merger Subsidiary") completed the merger in accordance with the terms and conditions set forth in the relevant agreements and merger plan ("Merger Agreement") signed on December 23, 2023.

After the completion of the merger, Gracell will no longer be a publicly listed company but will become a wholly-owned subsidiary of the parent company. Its American Depositary Receipts (ADRs) will also no longer be listed or traded on any stock exchange, including the Nasdaq Global Select Market, and the company's ADR program will officially terminate. In the announcement, Gracell also declared that it has submitted relevant applications to suspend the trading of its ADRs on Nasdaq starting from February 22, 2024 (New York time).

According to the announcement released by Gracell on February 20, the "Merger Agreement" was approved by the company's shareholders at the Extraordinary General Meeting ("EGM") held on February 19, 2024.Approximately 458,283,333 issued ordinary shares of the company, with a par value of $0.0001 per share ("Ordinary Shares"), including Ordinary Shares represented by the company's American Depositary Shares ("ADS"), were present in person or by proxy at the EGM. Each Ordinary Share held by a shareholder carries one vote. These shares represent approximately 94.8% of the total voting rights attached to the company’s outstanding Ordinary Shares as of the close of business on January 8, 2024, in the Cayman Islands. At this EGM, approximately 99.9% of the shareholders voted in favor of the acquisition agreement, the merger plan, and the transaction.

On February 22, the acquisition was officially completed. Gracell has become the first Chinese innovative pharmaceutical company to be fully acquired by an MNC in the history of China's Biotech industry.

In fact, this acquisition can be traced back to the end of December last year: On December 26, 2023, AstraZeneca announced that it had reached an agreement with Gracell to acquire the latter for a total price of approximately $1.2 billion (over 8.5 billion RMB). This transaction price represents an 86% premium over Gracell's closing price on December 22, 2023. Following the news that day, Gracell's U.S.-listed shares rose by 8.38%. Moreover, Gracell’s Q3 financial report showed a significant contraction in net loss to 67.6 million RMB, with R&D expenses decreasing by approximately 32.5%.

As the fourth Chinese cell therapy company to go public after Nanjing Legend, WuXi AppTec Juno, and Eternity Bio, Gracell is undoubtedly a leader in China's cell therapy field. Through this acquisition, AstraZeneca has gained access to Gracell’s core technology platforms and pipeline, further expanding its presence in cell therapy.

Gracell's core technology platform is mainly FasTCAR, a groundbreaking next-day production autologous CAR-T cell technology platform launched in 2017. The FasTCAR platform can significantly accelerate the cell production cycle from the traditional several weeks to completion within one day, which is expected to greatly reduce patient waiting time and lower the risk of disease progression. More importantly, compared with cells prepared using traditional CAR-T processes, FasTCAR-T cells exhibit a younger phenotype, endowing them with better in vivo expansion and more effective tumor-killing capabilities.

GC012F, a core product developed based on the FasTCAR technology platform, is an innovative BCMA/CD19 dual-target autologous chimeric antigen receptor T (CAR-T) cell therapy currently in clinical stage. It has the potential to deliver profound and long-lasting effects for cancer and autoimmune disease treatment, while offering differentiated safety advantages.

Currently, Gracell Biotechnologies is conducting multiple clinical studies on FasTCAR-T GC012F, with indications covering various hematological malignancies and autoimmune diseases. It has initiated a Phase 1b/2 IND clinical trial in the United States to evaluate GC012F for the treatment of relapsed/refractory multiple myeloma (RRMM), and a Phase 1/2 IND clinical trial for the same indication is about to be launched in China. Additionally, the U.S. FDA and China's NMPA have successively approved the IND application for GC012F targeting refractory systemic lupus erythematosus (rSLE). Meanwhile, an investigator-initiated clinical trial for the same indication has also been launched.

In recent years, not only have Chinese Biotechs been keen on "going global," but overseas giants have also shown great interest in entering the Chinese market. Eisai, AstraZeneca, Roche, GSK, Sanofi, Merck & Co., and several other global pharmaceutical leaders have been highly active in the Chinese market in recent years. Star company BioNTech reached licensing and collaboration agreements with multiple Chinese firms, including Yilian Biologics, DualityBio, OncoC4, and Premas Biotech, for various projects in 2023.

Is there a rational logic behind this "crazy shopping spree"? We can gain some insights from the previous statements made by some multinational corporations:

While discussing the Ambrx deal at the 2024 JPM conference, Johnson & Johnson mentioned its preference in business development (BD) for acquiring "assets near the Proof-of-Concept stage, as this allows the company to leverage its scale advantages in clinical, manufacturing, and sales to maximize the value of the asset."

According to a December 2023 article in The Times, GSK Chief Commercial Officer Luke Miels publicly stated that the company would focus on transactions worth $2 billion within the next six months to expand its drug pipeline. Meanwhile, Miels emphasized in the report that GSK is concentrating on "one to two highly targeted products." The core pipelines of such companies often represent significant market potential.

Analyzing recent BD transaction cases in the Biotech sector, it is not difficult to find that these Biotechs that have successfully cooperated with large pharmaceutical enterprises precisely meet the aforementioned conditions.

Moreover, there are relevant reasons why multinational enterprises come to China from thousands of miles away.

First,In recent years, the development of Biotech in China has been rapid, and the quality of its innovation is constantly improving. Nearly 90% of China's innovative pharmaceutical companies have founders with extensive scientific research and industrial experience in the pharmaceutical field, and many scientist-founders are even serial entrepreneurs. In terms of teams, China's innovative pharmaceutical companies already hold a strong hand. Based on the accumulation of several or even dozens of years by the founding teams in the pharmaceutical industry, along with their experience-based judgment of emerging technologies, it’s only a matter of time before these companies roll out excellent pipelines.

Second,In the current pharmaceutical environment, which is generally sluggish, the development of innovative drugs remains a continuous money-burning process. When domestic Biotech companies face internal financing difficulties or have not yet reached the IPO stage, collaborating with some large enterprises can be an effective way to quickly regain financial strength. On the other hand, these established partners not only bring immediate cash flow but also provide ongoing resource support and experience in industrial production during subsequent collaborations, helping Biotech firms that lack industrialization experience successfully move toward commercialization.

Third, and most importantly, China's pharmaceutical market shows a higher growth rate compared to other regions of the world.According to Sullivan data, the global pharmaceutical market size reached US$1,401.2 billion in 2021 and is expected to increase to US$2,114.8 billion by 2030; China's pharmaceutical market size was RMB 1,591.2 billion in 2021 and is expected to reach RMB 2,739 billion by 2030, with a compound annual growth rate of approximately 6.2% during this period.

In terms of innovative drugs, China has been advancing with full force in recent years. The scale of China's biopharmaceutical market is expected to reach 710.2 billion yuan by 2025 and 1,199.1 billion yuan by 2030, with a compound annual growth rate of approximately 12.7% from 2021 to 2030. In 2021, the scale of China's innovative drug market was 947 billion yuan, and it is projected to reach 2,058.4 billion yuan by 2030.

Whether assessed in terms of innovation quality, R&D efficiency, patient population, team talent, and more, China has long become a fertile ground for innovative pharmaceuticals. Truly capable Chinese Biotech companies will sooner or later become highly sought-after by major multinational enterprises.