The biopharma industry is abuzz with rumors of a potential takeover of CAR-T specialist Legend Biotech, a company renowned for its collaboration with Johnson & Johnson (J&J) on the BCMA CAR-T therapy Carvykti. An unnamed source cited by StreetInsider has revealed that Legend recently received a buyout offer and enlisted the advisory services of Centerview Partners to assess its strategic options. This news sent Legend Biotech’s stock soaring by 12% on the Nasdaq, while the share price of its largest shareholder and former parent, GenScript, increased by an impressive 25% on the Hong Kong exchange. Despite the sudden interest and market activity, GenScript claimed no knowledge of any corporate actions that could explain these spikes, and Legend declined to comment on what it termed as “market rumors.”
Success of the Collaboration with Johnson & Johnson
The Gains from Carvykti Partnership
Legend Biotech’s collaboration with J&J, which began in 2017, has been remarkably successful, especially in the development and commercialization of their CAR-T therapy, Carvykti. This alliance has produced noteworthy results, with J&J projecting peak sales for Carvykti to exceed $5 billion. Such success inevitably fuels speculation around the possibility of J&J acquiring Legend Biotech entirely. This seems plausible considering their existing 50-50 profit and cost-sharing arrangement outside of China, potentially simplifying an acquisition and consolidating operations under one roof.
Market Reaction and Industry Trends
The industry has recently witnessed a string of acquisitions where big pharmaceutical companies acquire their collaborators. For instance, last year, Sanofi acquired its diabetes partner Provention Bio for $2.9 billion, and Pfizer bought Biohaven Pharma’s CGRP inhibitor portfolio for $11.6 billion. Such transactions often aim to streamline operations and capitalize on successful partnerships. Centerview Partners have a history of advising on these high-profile deals, as evidenced by their role in Gilead Sciences’ acquisition of Kite Pharma. Given these precedents, an acquisition attempt by J&J to fully integrate Legend does not seem far-fetched, especially if the trends within Big Pharma continue along this path.
The Biosecurity Implications and Potential Suitors
Regulatory Concerns and the BIOSECURE Act
The backdrop of this potential acquisition is further complicated by looming biosecurity implications concerning Chinese biopharma providers like GenScript and Legend. The draft BIOSECURE Act in the U.S. underscores the geopolitical risks that might affect M&A decisions involving Chinese entities. Though there is no concrete evidence to suggest that Legend or GenScript will be directly targeted, the U.S. administration’s increasing scrutiny over foreign biopharma investments is palpable. J&J might prefer mitigating any future regulatory risks by fully integrating Legend Biotech into its portfolio, thus reducing its exposure to possible legislative changes that could arise from acts like BIOSECURE.
Interests from Novartis and AstraZeneca
Novartis emerges as another plausible contender in the race to acquire Legend Biotech. Recently, Novartis made an upfront payment of $100 million for Legend’s DLL3-directed CAR-T candidates, strengthening its foothold in this sector. Novartis also has experience in the manufacturing of Carvykti, adding another layer of familiarity and operational ease. However, with its mergers and acquisitions focus primarily on deals under $5 billion, the inflated market cap of Legend, now approaching $10 billion after the recent stock surge, might pose a considerable financial challenge for Novartis.
Conversely, AstraZeneca’s recent acquisition of Chinese CAR-T player Gracell Biotechnologies for up to $1.2 billion adds another layer of intrigue to this unfolding narrative. While this move highlights AstraZeneca’s interest in Chinese CAR-T technology, it likely positions AstraZeneca out of the running for Legend due to overlapping interests with Carvykti. Legend’s relationship with J&J and the potential biosecurity concerns make it a more suitable acquisition target for J&J compared to other pharmaceutical giants.
Conclusion: Synthesizing Market Dynamics and Strategic Possibilities
Legend Biotech’s partnership with Johnson & Johnson (J&J), which started in 2017, has proven extremely fruitful, particularly in the area of developing and bringing to market the CAR-T therapy, Carvykti. This collaboration has yielded significant achievements, with J&J forecasting peak sales for Carvykti to surpass an impressive $5 billion. The success of Carvykti naturally leads to speculation about the potential for J&J to fully acquire Legend Biotech. This idea gains traction given their current 50-50 profit and cost-sharing arrangement outside of China, which could simplify such an acquisition by consolidating operations and streamlining logistics. A full acquisition would not only cement their relationship but also potentially bolster innovation by unifying resources and expertise under a single corporate structure. Such a move could lead to enhanced efficiencies in research, development, and distribution, ultimately benefiting both companies and the broader medical community. This strategic consolidation could pave the way for future breakthroughs and solidify their leadership in the biotech sector.
