- EQRx, a biotechnology company that sought to disrupt U.S. drug pricing practices, is being sold to cancer drugmaker Revolution Medicines in an all-stock deal, the companies announced Tuesday.
- EQRx stockholders will receive 7,692,308 Revolution shares in the deal as well an additional $870 million worth of discounted stock in the cancer drug developer. To calculate the equity exchanged in the deal, the companies are using a “blended average” that accounts for Revolution shares’ worth near to when EQRx stockholders vote on the transaction.
- The acquisition will add more than $1 billion in net cash to Revolution’s balance sheet, and help fund development of some of the biotech’s cancer medicines. EQRx, meanwhile, will wind down its drug research and return the associated intellectual property to partners. Among those assets are a cancer drug, aumolertinib, in Phase 3 testing.
The acquisition is a quiet end for EQRx, which was launched three years ago by biotech venture capitalist Alexis Borisy and quickly became one of the sector’s most closely watched startups.
EQRx formed with an unusual mission to develop lower-cost branded alternatives to existing top-selling medicines. The company raised more than $2 billion for this “fast follower” approach of licensing or acquiring would-be competitors to marketed drugs and undercutting them on price. It went public two years ago by merging with a special-purpose acquisition company, and began testing would-be rivals to a variety of top-selling cancer medicines.
But a key part of EQRx’s plan involved acquiring drugs that were discovered by Chinese companies and primarily tested there. That strategy was undone when top cancer drug evaluators within the Food and Drug Administration began scrutinizing such medicines more closely, demanding they be evaluated in trials run in multiple countries.
The heightened standards left EQRx with a longer, more expensive road to the U.S. market. EQRx responded in 2022 by adopting “market-based pricing” plans for two drugs and cutting staff. Then, in May, the company abandoned its mission alongside a deeper restructuring.
At the time, EQRx claimed it would rely on its sizable bankroll and “team of experienced drug hunters” to develop “differentiated” medicines. Three months later, it has been acquired for its cash holdings, the result of a “rigorous process” that “thoroughly explored and considered strategic alternatives,” president and CEO Melanie Nallicheri said in a statement.
That cash will now support Revolution, a company developing drugs targeting “RAS,” a family of genes that are frequently mutated in cancer. Alongside the merger, Revolution is narrowing its focus to three of its most advanced programs and some other pipeline prospects. Two of them, known as RMC-6236 and RMC-6291, are in early human testing. The company’s first late-stage trials could begin next year.
The buyout provides “financial certainty in a challenging macroenvironment,” Revolution said in a statement. The company had about $910 million in cash at the end of March. Its shares climbed in Tuesday morning trading.
EQRx shares, meanwhile, have lost around 80% of their value since the company’s 2021 debut. They traded on Tuesday at about $2 apiece.