On March 19th local time, AstraZeneca announced that it will spend $2.4 billion to acquire the biopharmaceutical company Fusion Pharmaceuticals, and a final agreement has been reached. The acquisition is expected to be completed in the second quarter of this year, and Fusion will become a wholly-owned subsidiary of AstraZeneca, continuing to operate in Canada and the United States.
According to the data, the acquired Fusion is a company focused on developing next-generation radioconjugated drugs (RDCs). Its core product is FPI-2265, which is in the second phase of clinical development and targets prostate specific membrane antigen (PSMA) for the treatment of metastatic castration resistant prostate cancer (mCRPC). Radiopharmaceuticals, also known as nuclear drugs, are more specific than traditional radiation therapy. They can deliver radiation directly to cancer cells, minimizing damage to healthy cells and allowing them to enter tumors that cannot be reached by external radiation.
According to the terms of the final agreement, AstraZeneca will acquire all issued shares of Fusion at a price of $21.00 per share. In addition, if specific regulatory milestones are reached, an additional non transferable or valuable rights (CVR) of $3.00 per share will be paid. The transaction value of prepaid cash is approximately $2 billion, a 97% premium compared to Fusion's closing price of $10.64 per share on March 18 this year, and an 85% premium compared to the weighted average trading price of $11.37 per share in the 30 days prior to the announcement of the acquisition. If AstraZeneca completes the acquisition, the total transaction value will be approximately $2.4 billion, which is 126% higher than the closing market price of Fusion on March 18 this year and 111% higher than the 30 day VWAP.
Save Fusion from fire and water
According to the financial performance announcement for the fourth quarter and full year of 2023 released by Fusion on March 20, as of December 31, 2023, Fusion held $247 million in cash, cash equivalents, and investments, an increase of 32.1% year-on-year. Fusion expects that as of December 31, 2023, its existing cash, cash equivalents, and investments, as well as the net proceeds from the sale of common shares under the company's market stock issuance plan received in January and February 2024, as well as the net proceeds of $14.9 million from the company's existing debt financing withdrawal in January 2024, will be sufficient to fund operations in 2025.
This acquisition is undoubtedly beneficial for both AstraZeneca and Fusion. The acquisition marks an important step for AstraZeneca in changing cancer treatment methods and patient outcomes by replacing traditional treatments such as chemotherapy and radiation therapy with more targeted treatment options. As a biopharmaceutical company specializing in the development of radioconjugated drugs (RC), Fusion not only supplements AstraZeneca's leading cancer products, but also expands its own RC product line, including the company's state-of-the-art project FPI-2265.
Fusion CEO John Valliant stated that FPI-2265 is expected to launch the second phase of the mCRPC registration project in the second quarter of this year. If successfully launched, FPI-2265 will be the first actinide based PSMA targeted radioligand therapy drug on the market. Fusion will present data from the TATCIST trial at the American Association for Research on Cancer (AACR) in April.
In recent years, RCs have shown tremendous potential and advantages in the field of cancer treatment, opening up new avenues for cancer treatment methods. Actually, as early as 2020, AstraZeneca had collaborated with Fusion to develop and commercialize the next generation α Particle targeted radiation therapy and cancer combination therapy. In 2023, the EGFR-cMET targeted radioactive conjugate FPI-2068, jointly developed by both parties, underwent phase I clinical trials. FPI-2068 is an IgG based bispecific TAT aimed at delivering actinium-225 to various solid tumors expressing EGFR and cMET. EGFR protein and cMET protein are validated cancer targets, including head and neck squamous cell carcinoma, non-small cell lung cancer, colorectal cancer, and pancreatic ductal adenocarcinoma.
In addition, there is good news for the Phase I study of Fusion's FPI-1434, which has shown good safety and early evidence of anti-tumor activity. It is expected to provide the latest information about the program around mid-2024.
Multinational pharmaceutical companies are increasing their focus on the nuclear medicine track
In recent years, nuclear drug investment has become increasingly popular in the MNC field. From a global perspective, multiple RDC drugs have been approved and successfully commercialized. Bayer's radiation therapy drug Xofigo was approved in the United States as early as 2013 and was also approved for the treatment of prostate cancer in China in 2020. Since then, Bayer has repeatedly acquired related companies and increased its focus on the nuclear medicine industry. Novartis previously spent $2.1 billion to acquire Endocyte, Lilly spent $1.4 billion to acquire Point Biopharma, and Bristol Myers Squibb spent $4.1 billion to acquire RayzeBio. The addition of pharmaceutical companies such as Johnson&Johnson and MSD all reflect investors' attention to the nuclear medicine track and the enormous potential of the nuclear medicine market.
Nuclear medicine is a type of drug that uses injection or administration of radioactive isotopes and medical devices to detect the radiation emitted by radioactive isotopes in the drug, marking the diseased genes, molecules, metabolism, and functional status. This method can be used for in vivo tracking, localization, qualitative location of lesions, and killing tumors, and is now widely used in medical diagnosis and treatment. Radiopharmaceuticals can be classified into diagnostic radiopharmaceuticals and therapeutic radiopharmaceuticals based on their clinical use.
In January 2018, Novartis developed Lutathera, which was approved for sale by the FDA, for the treatment of gastrointestinal and pancreatic neuroendocrine tumors patients with positive somatostatin receptor (SSTR). Lutathera achieved sales of $167 million in its first year of listing, followed by explosive growth in the following years. In 2022, another RDC drug developed by Novartis, Pluvicto, for treatment, was approved for sale. Its revenue in 2023 reached $980 million, mainly for the treatment of metastatic castration resistant prostate cancer (mCRPC). The drug had global sales of $271 million in 2022 and $980 million in 2023, a surge of 261% compared to the same period. It is reported that the peak sales of the drug are expected to exceed 3 billion US dollars.
Although nuclear drugs are becoming a hot topic in the medical field, their unique properties have also brought a series of challenges to pharmaceutical companies. Nuclear drugs are produced based on radioactive elements, which determines that they have a fixed half-life and generally have a short duration, meaning that nuclear drugs cannot be mass-produced, stored, or transported over long distances like regular drugs. In addition, nuclear drug production technology is difficult, requires specialized production facilities, and production costs are also high. In addition, market regulation of nuclear drugs and factors such as the clinical trial cycle of the drug itself jointly constitute high threshold industry barriers.
According to a research report by Ping An Securities, multinational pharmaceutical companies are intensively laying out nuclear medicine through various means such as acquisition, equity investment, and technology introduction. From the perspective of indications, the research pipeline mainly focuses on prostate cancer, neuroendocrine tumors, and some solid tumors. From the perspective of treatment targets, it mainly focuses on PSMA, SSTR, FAP, etc., with a high concentration of indications and targets.
Domestic pharmaceutical companies have also accelerated their layout in recent years. According to the Blue Book on the Current Situation and Future Development of China's Radiopharmaceutical Industry released by Sullivan, as of October 2023, 32 radioactive drugs in China are in the clinical trial and application for listing stage, involving multiple enterprises such as Dongcheng Pharmaceutical, China Tongfu, Yuanda Pharmaceutical, and Hengrui Pharmaceutical. In terms of RDC drugs, as of October 2023, 31 new RDC drugs in China are in the clinical trial stage, of which 23 are used for diagnosis and 8 are used for treatment. Among the 31 RDC new drugs, 5 drugs are registered for clinical trials in CDE, while the other 26 drugs are undergoing IIT trials in hospitals/corporate joint hospitals.
