EQRx, known as the "TEMU" of the Pharmaceutical Industry, has been Acquired by Revolution Medicines

On August 1st, EQRx announced an agreement with Revolution Medicines to be acquired in an all-stock transaction, which is expected to be completed in November 2023. After the transaction is completed, EQRx's stock will cease trading on the Nasdaq Global Market.

It is worth mentioning that Revolution Medicines is not interested in EQRx's pipeline, but rather in the $1 billion cash on EQRx's books, and has explicitly stated that it does not intend to continue advancing EQRx's research projects. EQRx has stated that it will return the relevant rights to its partners, including a group of Chinese biotech companies.

EQRx, which was established in January 2020, initially aimed to disrupt the pricing of innovative drugs in the United States by introducing fast-follow products, and was therefore dubbed the "TEMU" of the pharmaceutical industry. With this model, EQRx became a favorite of capital and completed two rounds of financing totaling $700 million in its first year. After listing on Nasdaq, its valuation reached as high as $3.65 billion.

EQRx hoped to gain market share in the U.S. by offering lower-priced innovative drugs that were not significantly better than existing therapies, taking advantage of the window period when the patents of original drugs were expiring. Among the more than ten pipeline products it expanded through a license-in model, four were introduced from China.

In July 2020, Johnson & Johnson announced a strategic and licensing agreement with EQRx, through which EQRx acquired the overseas rights to Johnson & Johnson's subsidiary Janssen Pharmaceuticals' small molecule drug almonertinib for $100 million upfront and milestone payments. Almonertinib is a third-generation epidermal growth factor receptor-tyrosine kinase inhibitor (EGFR-TKI) developed by Janssen Pharmaceuticals. In March 2020, almonertinib was approved for marketing in China for the treatment of locally advanced or metastatic non-small cell lung cancer (NSCLC) in adults with EGFR T790M mutation-positive disease that has progressed on or after EGFR-TKI therapy.

The results of the Phase III AENEAS trial showed that compared to gefitinib, almonertinib significantly prolonged median progression-free survival (19.3 months vs 9.9 months, P<0.0001). In terms of secondary endpoints, almonertinib significantly prolonged median duration of response (18.1 months vs 8.3 months); the objective response rate (73.8% vs 72.1%) and disease control rate were similar (93.0% vs 96.7%). almonertinib is the first third-generation EGFR-TKI with a median PFS of over 1 year (second-line use) globally.

In October 2020, EQRx acquired the development and commercialization rights to tislelizumab (anti-PD-L1 antibody) and CS1003 (anti-PD-1 antibody) from CStone Pharmaceuticals for an upfront payment of $150 million and milestone payments of up to $1.15 billion. In addition, EQRx acquired the overseas rights to EQ121, a JAK1 inhibitor, from Innovent Biologics for a milestone payment of $172 million.

With these products developed by domestic companies, EQRx received significant attention from capital and raised $1.8 billion in financing at its initial public offering. Both almonertinib and tislelizumab were close to meeting the listing standards in the United States.

However, in recent years, the FDA has tightened the approval system for me-too drugs, emphasizing the policy orientation of diverse population data reporting and requiring innovative drugs to be approved for marketing only if they are not inferior to standard therapy.

This means that EQRx needs to conduct unplanned head-to-head trials and provide better data for its introduced pipeline to obtain FDA approval for marketing. This will cause EQRx's me-too drugs to miss the originally expected window period, and with the effect of the "Inflation Reduction Act" on the regulation of high-priced drugs in the United States in the coming years, drug prices will be suppressed, making it impossible for EQRx's expected low-price, low-profit model to be sustained.

Therefore, in the third quarter report of 2022, EQRx announced that it was giving up the application for the U.S. market for tislelizumab in NSCLC patients and abandoning its low-price strategy. Subsequently, the company laid off 57% of its employees and reduced its pipeline to only one product, Lerociclib (CSK4/6 inhibitor).

On August 1st this year, Revolution Medicines announced that it would acquire EQRx in an all-stock transaction, marking the complete demise of EQRx's struggle and dreams. On August 4th, Johnson & Johnson announced that it had received a written notice from EQRx regarding the termination of the strategic cooperation and licensing agreement for almonertinib, which will terminate after the expiration of the agreed term. After the termination of the agreement, Johnson & Johnson will regain the rights to research, develop, manufacture, and commercialize almonertinib outside of China. The termination of the licensing agreement will not affect the upfront and milestone payments previously received from EQRx.

For Johnson & Johnson, although it has received a considerable amount of income, the development progress of almonertinib has undoubtedly been delayed. Johnson & Johnson and EQRx had high hopes for almonertinib, to the extent that in August 2022, EQRx initiated a Phase III clinical trial (TREBLE) of almonertinib overseas, with a control group of almonertinib plus chemotherapy and osimertinib, one of the few drugs that directly competes with osimertinib.

From EQRx's experience, we can see that relying solely on a "cost-effective" strategy is not viable in the U.S. market in the short term. Only substantial improvements in clinical efficacy and meeting unmet clinical needs are the fundamental basis for Chinese innovative drugs to establish a foothold in the U.S. market.

References:

1. https://cn.hspharm.com/upload/file/2023/08/04/37a2ff9bf5f545d987707715cc78ac6d.pdf.

2. https://investors.eqrx.com/news-releases/news-release-details/revolution-medicines-inc-acquire-eqrx-inc-all-stock-transaction.