Key Takeaways:

• Cancer treatment maker ProfoundBio announced it will be purchased by Denmark’s Genmab for $1.8 billion
• The deal is the fourth acquisition of a China-related innovative drugmaker by a foreign company in the last four months

By Doug Young

In the tumultuous world of innovative Chinese drug makers, ProfoundBio Inc. recently joined the league of companies embracing the benefits of having a wealthy parent to cater to their financial needs. The announcement of its acquisition by Danish firm Genmab A/S (NASDAQ: GMAB) for a hefty $1.8 billion in cash sent ripples across the industry.

This acquisition marked the fourth instance of a foreign entity swooping in to acquire a China-related innovative drugmaker within a span of just four months. The trend of such acquisitions is gaining momentum, painting a picture of a shifting landscape in the realm of biopharma.

As the world awaits more developments in the biopharma landscape, it’s intriguing to dissect the factors propelling this trend and the reasons behind its somewhat belated initiation.

Until 2018, Chinese innovative drugmakers were conspicuous by their absence from foreign stock markets. Hong Kong’s alteration of listing rules initiated a transformative wave, allowing these companies to access public markets for funding, paving the way for a flurry of listings.

While drug development in the West typically involved private funding until late-stage clinical trials, Chinese companies took a different route. Stock market investors flocked to acquire shares of these companies, despite their non-profitable statuses, propelling a surge in valuations.

However, the euphoria was ephemeral as the fervor waned and shares of listed drugmakers nosedived over the past three years. Optimistic projections for the Chinese market collided with the harsh reality of pricing pressures, delaying profitability and dampening investor sentiment.

An Insights into China-U.S. Hybrid Dynamics

Amidst this backdrop lies the narrative of Genmab’s latest move to acquire ProfoundBio, an entity with unique U.S.-China ties. While ProfoundBio is headquartered in Seattle, its operations in Suzhou embody a fusion of U.S. and Chinese influences. Embarked on this journey in 2018 by Chairman and CEO Zhao Baiteng, the company boasts a robust pipeline with three drugs in clinical trial stages.

Rinatabart sesutecan (Rina-S), its cutting-edge antibody-drug conjugate targeting ovarian cancer, is making strides in Phase 2 clinical trials. Noteworthy was its FDA’s fast-track designation in January, signaling a potential expedited market entry.

The acquisition follows ProfoundBio’s successful $112 million B-series funding round just two months prior, gathering support from reputable backers like OrbiMed and Lilly Asia Ventures, the Asia venture arm of U.S. pharmaceutical juggernaut Eli Lilly (NYSE: LLY).

Expanding the horizon, the biopharma sector witnessed two more acquisitions stemming from pre-IPO companies. SanReno Therapeutics’ acquisition by Novartis and AnHeart Therapeutics’ deal with Nuvation Bio Inc. underscored the diverse landscape navigating the biopharma acquisitions realm.

While the transaction values exhibited a range from $240 million to ProfoundBio’s whopping $1.8 billion deal, the emphasis seems to tilt towards pre-IPO entities possibly due to a dire need for capital infusion.

As the spotlight shifts, listed entities like ArriVent BioPharma (NASDAQ: AVBP) and ImmuneOnco Biopharmaceuticals appear as poised targets for potential acquirers, owing to their promising drug portfolios and the arduous journey of standalone drug development.

Embracing the reality of building a successful drug enterprise, Chinese startups are navigating uncharted waters, discovering the profound impact of aligning with financially robust backers to steer through the intricacies of drug development.