SPAC target Prenetics sinks on US debut

Prenetics agreed to merge with Artisan Acquisition Corp, a SPAC sponsored by Adrian Cheng, scion of property developer New World Development and managing partner of C Ventures, last year at an enterprise valuation of USD 1.25bn. It had previously raised funding from Alibaba Group’s Hong Kong Entrepreneur Fund, Beyond Ventures, Apis Partners, 500 Global, Gobi Partners, and Ping An Ventures.

The stock ended May 17 on USD 10.50, nearly at par with the SPAC offering price. It dropped as soon as post-merger trading began the following day and investors redeemed their positions. Prenetics closed on USD 7.65. Further losses were to come on May 19, with the company hovering around the USD 5.50 mark as of mid-morning trading. Its market capitalisation was USD 1.07bn.

“It was my core mission to seek out a high growth company with the potential to make a meaningful impact on the healthcare industry globally and I’m very pleased it was Prenetics. This is an important milestone not only for Prenetics, but for all next-generation entrepreneurs in Hong Kong,” Cheng said in a statement, noting that Prenetics is the first Hong Kong unicorn to list on NASDAQ.

Prenetics has gained prominence for COVID-19 testing services, achieving significant market share in Hong Kong and Europe. The company has processed and delivered over 22m COVID-19 laboratory and rapid at-home tests globally for government and multinational clients. Diagnostics – primarily comprising COVID-19 tests – accounted for USD 50.9m out of its USD 65.2m in revenue for 2020.

However, the prospectus acknowledged the risks of overdependency, noting that COVID-19 testing is competitive and demand may dwindle with the rise of more vaccines and treatments. Founder and CEO Danny Yeung said he wanted the revenue share from COVID-19 testing to fall to 20% by the end of 2023. He added that shareholders would be rewarded if Prenetics completes this transition.

The company, founded in 2014, made initial headway with consumer genetic testing. It has performed 140,000 CircleDNA tests, utilising whole-exome sequencing, in over 30 countries to date. Other services include colorectal cancer screening and medical genetic testing. The rapid point-of-care and at-home diagnostic testing that underpins the COVID-19 service also has wider applications.

Prenetics has permanent operations across nine locations, including the UK, Hong Kong, India, South Africa, and Southeast Asia. It claims to be in advanced M&A discussions with companies in Europe and Southeast Asia regarding telehealth and personalised care.

Revenue rose from USD 9.2m in 2019 to USD 65m in 2020 and USD 275.8m in 2021. The net losses for the same three years were USD 20.2m, USD 1.96m, and USD 174m, respectively. It is estimated revenue will reach USD 640m by 2025 – over two-thirds from diagnostic testing, 25% from DNA testing, and 7% from personalised care products focused on nutrition haircare and sexual health.

Based on an assumption of zero redemptions, SPAC investors would have owned 26.51% of the merged entity, while the SPAC sponsor held 5.05%. The sponsor typically receives a 20% stake in the SPAC, not the merged entity, for a nominal sum post-listing. PIPE and forward purchase agreement investors contributed USD 120m ahead of the merger for 9.74%.

The bulk of the USD 1.71bn in equity came from existing investors and Yeung, who rolled over their positions. They stood to have interests of 51.51% and 6.97%, respectively, post-merger.

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• Topics
• Greater China
• North America
• IPO
• Healthcare
• Hong Kong (China)
• C Ventures
• Apis Partners
• Beyond Ventures
• 500 Startups
• Gobi Partners
• Ping An
• SPAC