Source: Investment Community (ID: pedaily2012) Author: Chen Xiao
New ideas for mergers and acquisitions.
Another Biotech merger was born.
Not long ago, Nuvation Bio, a publicly listed biopharmaceutical company, announced the acquisition of AnHeart Therapeutics, a Chinese biopharmaceutical company. Under the terms of the agreement, the acquisition will be conducted in an all-stock transaction: upon completion of the acquisition, AnHeart BioPharma shareholders will hold approximately 33% of Nuvation Bio's shares.
Prior to this, AnHeart Therapeutics completed three rounds of financing, gathered a number of investment institutions, and planned to list on the Science and Technology Innovation Board in 2021. However, the listing environment has changed, the IPO is hopeless, and the company has chosen a more pragmatic way - being merged.
The investment institution behind him has turned into holding shares in the listed company Nuvation Bio, which is equivalent to the indirect listing of AnHeart Bio. This undoubtedly brings new ideas for the current dilemma of exiting the primary market.
01
Abandoning the IPO, investors can exit after a Series B company is acquired
AnHeart Therapeutics' story begins with three doctors.
Around 2017, Dr. Wang Junyuan, who has worked in international pharmaceutical companies for nearly 20 years, and two other friends, Dr. Yan Bing and Dr. Zheng Lihua, came up with the idea of starting a business together. At that time, Chinese innovative drug companies sprung up like mushrooms after a rain, and the license-in model led to the rapid rise of many innovative drug companies.
After some consideration, the three PhDs decided to start their own business from there. Soon, the Japanese pharmaceutical company Daiichi Sankyo Co., Ltd.'s investigational small molecule inhibitor DS-6051b (taletrectinib) caught their attention. Data show that Taletrectinib is a next-generation ROS1/NTRK inhibitor with potential effects in patients with cancer brain metastases.
In 2018, AnHeart Therapeutics set sail and is currently in a successful clinical trial of taletrectinib, which is expected to be marketed conditionally through a Phase 2 trial. Management had estimated that Taletrectinib would peak sales of $300 million after its IPO with conservative estimates. In addition, AnHeart Therapeutics has also introduced two innovative clinical oncology drug candidates, AB-218 and AB-329 (AnHeart Therapeutics) from Daiichi Sankyo, both of which are currently in clinical research stage.
Since its establishment, AnHeart Therapeutics has also followed the path of other biotech in China - financing and burning money, and has maintained a round of financing speed almost once a year.
In 2019, AnHeart Pharma completed a RMB 100 million Series A financing led by Decheng Capital, in 2020, it completed a Series A+ financing of US$24 million, and in December 2021, AnHeart Therapeutics announced the completion of a US$6,100 Series B financing, led by Octagon Capital, followed by Innovent Biologics, Sage Partners, and Laurion Capital.
In 2020, Wang Junyuan said in an interview with the media, "IPO can be listed around the end of 2022." But now three years later, AnHeart Therapeutics' IPO has not come as expected. One of the reasons is that after the second half of 2021, the Science and Technology Innovation Board almost no longer accepts license-in pharmaceutical companies. The failure to go public and the delay in financing have put AnHeart Therapeutics in a dilemma.
Until the advent of Nuvation Bio. According to the data, Nuvation Bio was founded in 2018 and focuses on the development of oncology therapies. In 2021, Nuvation Bio successfully listed on the New York Stock Exchange through a merger with Panacea Acquisition Corp, a SPAC company.
However, Nuvation Bio has been suffering from the lack of core pipeline products, and its stock price has fallen all the way since its listing, falling by more than 70%. The company was desperately looking for a strong pipeline product to change its predicament, and AnHeart Therapeutics, which has a pipeline with a clear schedule expectation, became one of the targets.
So, the deal was a logical one. Upon completion of the acquisition, AnHeart Therapeutics shareholders will hold approximately 33% of Nuvation Bio's shares, AnHeart Therapeutics' team will join Nuvation Bio, and AnHeart Therapeutics' investors, Decheng Capital Founder Cui Xiangmin and AnHeart Therapeutics CEO Junyuan Wang, will join Nuvation Bio's Board of Directors. Based on the market capitalization of Nuvation Bio's share price, the deal is about US$240 million (about 1.75 billion yuan).
This means that the investor's stake in AnHeart Bio has become a stake in the listed company Nuvation Bio, which can be traded in a liquid and has the opportunity to exit.
02
This year, China's Biotech mergers and acquisitions have been booming
The latest scene is on the eve of the Qingming Festival, when Genmab and Pfang Biotech jointly announced that Genmab will acquire Pfang Biotech in an all-cash transaction for $1.8 billion. Barring any surprises, this would be the largest takeover of a Chinese pharmaceutical company this year.
With the completion of the cash acquisition, dozens of investment institutions behind Pufang Biotech have successfully exited, and they are in the pocket. And 13 billion in cash, even an IPO may not have such an ideal return.
I still remember that at the end of last year, the multinational pharmaceutical company AstraZeneca announced the acquisition of the domestic pharmaceutical company Gracell Biologics. According to official disclosures, the total transaction value of the acquisition is up to about 1.2 billion US dollars (about 8.5 billion yuan), and the premium is almost 100%.
This price also allowed the primary market investment institutions and secondary market private placement institutions behind Gracell to make a profit and exit.
According to the previous path, most biotechs are only expected to make money for investors after they survive to large-scale commercialization, but now it is earlier to make "pockets safe" through mergers and acquisitions.
There is no way to IPO, financing is blocked, and lack of cash flow is a common dilemma faced by biotech companies today. As a result, more and more M&A cases are emerging.
In January this year, Chenyi Investment and Mindray completed a mega merger and acquisition - Mindray Medical spent 6.65 billion yuan to acquire 24.61% of Huitai Medical's shares, taking control of Huitai Medical in one fell swoop. The 30% premium acquisition allowed Huitai Medical and its investors to make money in one fell swoop.
Half a month ago, Daniel Zhang, former chairman and CEO of Alibaba Group, also announced that he would join Morning One Fund and serve as the managing partner together with founder Liu Xiaodan, focusing on the new future of M&A investment. The 52-year-old Xiaoyaozi set off again - to devote himself to mergers and acquisitions, which became a landmark scene in mergers and acquisitions.
03
Be vigilant against the dilemma of withdrawing from the primary market of the dammed lake
M&A is booming for no reason.
As far as the eye can see, the difficulty of exiting is sweeping the primary market. "Last year, all employees raised funds, and this year all employees withdrew", more than one investor expressed his eagerness to withdraw at the moment.
In the past, the main channel for VC/PE to exit was through IPO, but now the situation has changed dramatically. According to data from the Qingke Research Center, in the first quarter of 2024, 46 Chinese enterprises were listed at home and abroad, down 52.6% and 40.3% year-on-year respectively, and the initial financing amount was about RMB 27.483 billion, down 62.0% and 47.3% year-on-year respectively. Judging from the IPO report card of VC/PE institutions, it has hit a new low in the last five years.
The "dammed lake" has quietly become the current exit situation.
"In the past, the primary market relied heavily on the IPO exit path, S funds have not yet developed, and M&A transactions have not been very active. "An investor has broken through today's predicament. VC/PE began to adjust their exit strategies, so we saw such a scene -
Many investment institutions mobilize all employees to exit, not only the IR is saddled with the exit KPI, but the investment managers and institutional partners also use their network resources to retreat.
And mergers and acquisitions have also become the only choice left for everyone. After the Spring Festival in 2024, the team of a Shenzhen RMB fund is recruiting M&A team members while optimizing the investment team. "After this order, it's time to move on to mergers and acquisitions. "There are also investors on social media who have revealed the internal changes this year.
However, the road to domestic mergers and acquisitions is not easy. The most difficult thing is pricing, there is no standard valuation pricing system in the primary market, and the biggest difficulty is not to negotiate the price. Especially for startups whose business models have not yet been profitable, how to evaluate pricing is a difficult problem. Therefore, the reality is that it is difficult for most companies to exit smoothly through mergers and acquisitions.
In any case, the prologue is slowly opening.
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