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  • Greater China

Hong Kong's Prenetics agrees $1.25b SPAC merger

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  • Tim Burroughs
  • 16 September 2021
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Hong Kong-based genetic testing business Prenetics has agreed to merge with a special purpose acquisition company (SPAC) sponsored by Adrian Cheng, scion of local property developer New World Development and managing partner of C Ventures, at an enterprise valuation of $1.25 billion.

Prenetics has raised $85 million in funding to date, including a $40 million round led by Alibaba Group’s Hong Kong Entrepreneur Fund and Beyond Ventures in 2017, and a $15 million round led by Apis Partners last year. Other backers include 500 Startups, Gobi Partners, and Ping An Ventures.

The company has performed more than five million diagnostic and genetic tests in Hong Kong and the UK. Prenetics was the first private laboratory appointed by the Hong Kong government to perform mass community COVID-19 testing. It also ran tests for the virus at all 20 English Premier League clubs, playing an instrumental role in the restart of the 2020-2021 season.

The SPAC, Artisan Acquisition Corp, raised $300 million through a NASDAQ offering in May. SPAC investors and the SPAC sponsor will together hold a 25.3% interest in the merged entity. The sponsor typically receives a 20% in the SPAC, not the merged entity, for a nominal sum post-listing. Most of the equity – $1.15 billion out of $1.71 billion – comes from existing investors in Prenetics.

A further $120 million will come from forward purchase agreements (FPA) with Aspex Management and PAG, and a PIPE commitment from the likes of Lippo Group, Dragonstone Capital, and Xex Capital. The FPA and PIPE investors will hold a combined 7.5%.

The transaction, which values the company at 4.6x projected revenue for 2022, will create balance sheet cash of $459 million, according to a presentation. It still needs to be approved by a majority of SPAC investors. On completion, they can exercise their warrants and purchase shares or redeem some or all their shares for cash.

Founded in 2014 by serial entrepreneur Danny Yeung (pictured, left, with Cheng), Prenetics operates in 10 countries with a team of more than 700. In addition to COVID-19 testing, it provides consumer genetic testing and early colorectal cancer screening services.

Most recently, it introduced point-of-care diagnostics and at-home rapid detection system for infectious diseases. COVID-19 was the initial focus, but R&D work has begun on tests for influenza and sexually transmitted diseases. Using technology developed at the University of Oxford, individuals receive laboratory PCR-quality results in just 20 minutes via smart phone or other device.

Prenetics hopes to receive emergency use approval for the system – known as HealthPod – from the US Food & Drug Administration (FDA) in the first quarter of 2022. The company claims that only Cue Health, which recently filed for a US IPO, has a comparable molecular point-of-care testing product.

The company generated $65 million in revenue in 2020, up from $9 million a year earlier. Its net loss narrowed from $20 million to $2 million, while adjusted EBITDA swung from negative $12 million to $4 million. More than three-quarters of revenue comes from diagnostic testing and the rest from DNA testing.

It is estimated revenue will reach $640 million by 2025, with more than two-thirds of that generated by diagnostic testing, 25% from DNA testing, and 7% from personalized care products focused on nutrition haircare and sexual health. The company will still be posting a net loss - $19 million – but adjusted EBITDA will hit $39 million.

The global market opportunity, based on 2030 projections, is $1.3 trillion: $848 billion in diagnostics, $117 billion in DNA testing, and $376 billion in personalized care.

“Our goal is to decentralize healthcare by bringing it closer to millions of patients globally. I am humbled and honored by Adrian’s trust in us, and we look forward to continuing to work closely across his extensive business network to deliver on the massive potential which exists to disrupt the healthcare market,” Yeung said in a statement.

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