AstraZeneca to Purchase Gracell Biotechnologies for $1.2B

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Facts

  • Anglo-Swedish pharmaceutical company AstraZeneca announced Tuesday it's buying Chinese cancer therapy company Gracell Biotechnologies for $2 per share, or $1.2B, in a cash deal that will give shareholders a non-tradable contingent value right of $0.30 per ordinary share if certain regulatory requirements are met.1
  • The combined $1.2B deal includes $1B upfront as well as the cash, cash equivalents, and short-term investments on Gracell’s balance sheet, which amounted to $234.1M as of the end of the third quarter.2
  • AstraZeneca will now also control the Chinese company's CAR-T cell therapy, which reprograms a patient's immune T-cells to target disease-causing cells. Besides growing its presence in China, which makes up 13% of the pharma company's total sales, AstraZeneca's Oncology R&D Vice Pres. Susan Galbraith said the deal will boost its 'existing capabilities and previous investments in cell therapy.'3
  • The move, which follows news over the summer that AstraZeneca was considering switching its local business listing from the US market to that of Hong Kong or Shanghai, is the second deal it's made with a Chinese company in as many months. In November, the Western company also agreed to develop a weight loss drug with Chinese biotech firm Eccogene.4
  • AstraZeneca CEO Pascal Soriot earlier this year said the company had brokered a total of three deals with Chinese companies, including a contract manufacturing deal with CanSino Biologics for its mRNA vaccine program in August.5

Sources: 1Yahoo Finance, 2The Wall Street Journal, 3The Economic Times, 4The Guardian and 5Invezz.

Narratives

  • Narrative A, as provided by Pharmaceutical Technology. While the US will certainly remain the world's leading market for pharmaceutical investments in the short term, China has embraced exponential growth in foreign investment for years and is still growing. China, with its growing wealth and aging population, has seen an explosion of age-related illnesses as well as infectious diseases usually seen in poorer countries. Due to this, companies like AstraZeneca and Pfizer will surely look to tap into the government's ambitious healthcare industry expansion project.
  • Narrative B, as provided by Coalition for a Prosperous America. Big Pharma companies, particularly those based in the US, are using loopholes to charge high prices to the people of their respective countries while also avoiding domestic taxes. This means that, as American taxpayers foot the bill for research and development, the company then manufactures its medicine abroad and claims its profits in other countries, thus leaving its home country without any of the tax revenue. These companies need to be heavily taxed if they want to offshore manufacturing while retaining high prices.