With a $1.2 billion dollar acquisition of Gracell Biotechnologies, pharmaceutical giant AstraZeneca has firmly entrenched itself in the Asian market. The company is not only expanding its footprint, but also broadening its scope with its foray into cell therapy—Gracell’s specialized offering. With hopes to finalize before the year turns, the acquisition is set to create immense value for shareholders and explore new frontiers in medicine, while solidifying AstraZeneca’s place in the annals of Big Pharma, with their introduction to the world’s second-largest pharmaceutical market. Here’s exactly what this acquisition means for both AstraZeneca and Gracell.
New Year, New Treatments
AstraZeneca will ring in the new year with the confidence that advanced therapies and treatments are on the horizon, particularly for patients with cancer and autoimmune diseases. Gracell specializes in CAR-T cell therapy; the manipulation of T-cells to enhance the body’s natural healing and protection functions. T-Cells are a specific type of white blood cell that protect against germs and fight disease. CAR-T cell therapy is a form of immunotherapy that is rapidly employed as a preferred treatment method, due to its longevity and low patient burden.
As a biotech startup, Gracell is innovating the process of developing CAR-T cell therapy to benefit patients. Developing CAR (chimeric antigen receptor) treatments has long been a costly, time-consuming process that fatigues the very T-Cells needed to fight cells causing disease and cancer. FasTCAR is Gracell’s answer to the problem. They’ve developed a next-day manufacturing process that reduces patient waiting time, typically one to six weeks, to 24 hours, while also reducing costs and strengthening the fitness of T-cells. T-cell fitness directly relates to its capacity to effectively eliminate diseased cells. This advanced biotechnology has promising use cases in effectively treating blood cancers and resetting the immune system in an effort to eliminate autoimmune diseases.
The long-term outlook is that CAR-T therapy can be adapted for the treatment of various rare diseases, offering a beacon of hope to patients with terminal and chronic illnesses and diseases. With the reduced costs, Gracell enables access to life-saving therapies to a broader group of patients. At the same time, AstraZeneca’s global presence can efficiently scale and distribute these therapies to patients around the world. The acquisition will build on AstraZeneca’s own pipeline of therapies in oncology and hematology. Gracell’s founder, Dr. William Cao, shares in the optimism, stating, “We look forward to working with AstraZeneca to accelerate our shared goal of bringing transformative cell therapies to more patients living with debilitating diseases. By combining our expertise and resources, we can unlock new ways to harness Gracell’s FasTCAR manufacturing platform, which we believe has the potential to optimize the therapeutic profile of engineered T-cells, to pioneer the next generation of autologous cell therapies.”
The Financial Implications
An acquisition crossing the “unicorn” threshold of one billion dollars always holds a significant interest in the realm of dealmaking. The definitive agreement term indicates that AstraZeneca acquired all the available fully diluted shares in cash through a merger instrument at a price of $2.00 per ordinary share. This included American Depository Shares, valued at an equivalent of $10.00 per ADS of the company at closing. Additionally, the deal included a non-tradable contingent value right at $0.30 per ordinary share, which translates to an equivalent of $1.50 per ADS. This is payable upon the achievement of a specified regulatory milestone, giving plenty of incentive to both teams to streamline processes and work together efficiently in managing the merger process.
A transaction of one billion dollars was processed on 22 December 2023; the upfront cash consideration. This offered Gracell a 62% premium bump in closing market price and added a 154% premium to the 60-day-volume-weighted average price (VWAP), bringing the ADS to $3.94 before the announcement. The overall summary of the transaction reads beautifully (if you held Gracell stock any day before the 22nd December 2023), with the total upfront and potential contingent value combined representing a transaction valued at around $1.2 billion. This effectively added an 86% premium to the closing market day price, and a 192% premium to the 60-day VWAP. Per the agreement, AstraZeneca gained the cash, cash equivalents, and short-term investments on the Gracell balance sheet, totaling $234 million as of September 30, 2023. Going into the new year, dealmakers inside the transaction expect to see it come to a close within the first quarter of 2024, with consideration of closing conditions, and approvals from regulators and Gracell shareholders. Should the deal go ahead, Gracell will deregister from the NASDAQ (where ADS shares are listed) and will be privately held.
About Gracell
Gracell Biotechnologies is a health-tech startup focused on clinical-stage biopharmaceutical trials. Gracell is dedicated to the discovery and development of cell therapy for the treatment of various cancers and autoimmune diseases. Their revolutionary breakthrough technology, FasTCAR provides an innovative solution to T-cell therapy, reducing the manufacturing time by up to six weeks, and in so doing, reducing costs and increasing the efficiency of T-cells to fight malignant cells. Gracell focuses on producing autologous and allogeneic solutions, removing and reducing donor-dependency in treatment options. For patients fighting against the clock, this is a life-saving alternative that not only eliminates the time constraints for treatment, but also the treatment burden on patients.
Currently, in clinical trials, GC012F is a dual-targeted B-cell maturation (BCMA) and CD19 CAR-T therapy. It’s tapped to be the frontline treatment for patients with newly diagnosed multiple myeloma (NDMM), where transplant eligibility and high risk are present factors. Phase 1 trial data demonstrates a groundbreaking 100% overall response rate (ORR) as well as a 100% minimal residual disease stringent complete response (MRD-sCR). This is significant as the MRD-sCR is considered the “Deepest response possible in the treatment of multiple myeloma patients”, Dr. Wendy Li, Chief Medical Officer at Gracell, stated. She went on to say, “This stands as a testament to the tremendous potential of CAR T-cell therapy, our pioneering BCMA/CD19 dual-targeting approach, and the enhanced T-cell fitness enhanced by FasTCAR manufacturing technology.”
Early results from the phase 1 trial, consisting of 16 patients, were presented at the 2022 American Society for Hematology (ASH) annual meeting. The trial (open-label, single-arm, phase 1 investigator-initiated) provided patients with GC012F, administered at three target dose levels. 89% of the patients were classified as stage 2 or stage 3 myeloma, while 63% presented extramedullary plasmacytoma (neoplastic plasma cell tumors found in locations other than the bone). Remarkably, the 100% ORR and MRD-sCR results were achieved after an average follow-up period of 15.3 months, with the time frame ranging from 3.1 months to 24.5 months.
Conclusion
AstraZeneca popped into the pharmaceutical mainstream during COVID-19, as one of the few companies that provided vaccinations in a world government-coordinated vaccine response. Since then, the Anglo-Swedish multinational pharmaceutical company has gained traction and visibility, most recently with its acquisition of Chinese biopharmaceutical startup, Gracell Biotechnologies. In an effort to increase its product offering in oncology and hematology, sectors where the company has already established a footprint, the merger will enable AstraZeneca to enrich its pipeline of clinical-stage pharmaceuticals using CAR-T therapy. Gracell has elevated T-cell therapy, reducing manufacturing time and cost, and increasing T-cell fitness. With excellent results from its flagship product, the GC012F therapy for multiple myeloma, the future of cell therapy is promising. This deal, valued at approximately $1.2 billion, buys AstraZeneca considerable visibility and presence in China, the second-largest pharmaceutical market. It also shows consideration for Gracell’s ingenuity and innovation, as well as AstraZeneca’s own commitment to pushing the envelope when it comes to research and development of life-saving therapies.
