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British pharma giant AstraZeneca PLC AZN-Q has agreed to buy one of Canada’s most promising biotechnology companies for up to US$2.4-billion, the latest in a string of takeovers of domestic drug developers.

AstraZeneca said early Tuesday that it would pay US$21 a share for precision cancer drug developer Fusion Pharmaceuticals Inc. FUSN-Q, or US$2-billion total. That’s almost double the Hamilton, Ont.-based company’s US$10.64 closing price Monday on the Nasdaq. The stock opened at US$20.96 Tuesday and closed at US$21.18.

Fusion shareholders could get US$3 more a share, or US$400-million, in the form of non-transferable value rights if it files a new drug application with the U.S. Food and Drug Administration (FDA) by 2029.

AstraZeneca said in a release the deal marks a “major step forward” in its ability to replace traditional cancer treatments, such as chemotherapy and radiotherapy, with more targeted medicines that use molecules such as antibodies, peptides or small molecules to deliver nuclear isotopes to problematic cells. The drug giant, which had previously partnered with Fusion on early-stage development programs, will keep the Hamilton company as a wholly-owned subsidiary with operations continuing in Canada and the U.S.

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It’s also a rare win for the Canada Pension Plan Investment Board in the biotech sector on its home turf. CPP is one of the only domestic institutional investors outside Quebec to invest in the Canadian life sciences space, part of a global investment initiative. It paid US$20-million for most of its 3.1 million shares, which will be worth up to US$75-million in the takeover.

Another early Canadian backer, Genesys Capital, will also make out handsomely. The Toronto venture capital firm invested US$7.25-million for preferred stock and warrants when Fusion was private, which translated into 1.5 million common shares when it went public in 2020. Genesys managing director Damian Lamb said his firm has never sold and even purchased more. Its pre-IPO stake alone will be worth four to five times what Genesys paid, making it one of the firm’s three most lucrative exits, he said.

The deal is the latest in a recent spate of takeovers in the surging radioconjugates space, seen as one of the most promising fields in medicine. The class of drugs target and detonate tumour cells by delivering nuclear isotopes while limiting the impact on nearby, healthy cells.

Eli Lilly & Co. bought Point Biopharma Global Inc., a U.S. company with significant operations in Canada, last year for US$1.4-billion. The purchase was followed months later by Bristol-Myers Squibb Co., which paid US$4.1-billion for RayzeBio Inc. in a fast, hotly contested process. That led industry observers to predict Fusion would be next.

“This space is hot from a mergers and acquisitions standpoint because these drugs have been shown to be clinically meaningful, and to be a big player in this field Big Pharma cannot easily assemble the expertise from scratch,” said Brian Bloom, chief executive officer of Toronto life sciences underwriter Bloom Burton & Co. “Small biotechs in the field have advanced expertise in isotope sourcing, manufacturing and specific clinical and regulatory understanding.”

Fusion CEO John Valliant has called his company’s lead drug, which combines antibodies that target and enter prostate cancer cells with a payload of radioactive alpha isotopes, a “smartbomb for cancer.” Research on mice has shown the therapy shrinks tumours from a range of cancers. Fusion can also switch out the radioactive component for an imaging agent so doctors can see if the payload gets to the right places. That makes it easy to know before treatment if the drug will work or if there will be any side effects.

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It’s also yet another $1-billion-plus takeover in the flourishing Canadian biotechnology sector, after deals last year for Inversago Pharma Inc., Bellus Health Inc. and Chinook Therapeutics Inc. Trillium Therapeutics Inc. and Baylis Medical Co. Inc.’s cardiovascular-device unit sold for 10-figure sums in 2021.

Fusion is one of the more advanced players in the radiopharmaceutical space. It was spun out in 2017 from McMaster University’s Centre for Probe Development and Commercialization, where Genesys’s Mr. Lamb serves as a director. The centre was established in 2008 and backed by the university, the federal Networks of Centres of Excellence and the Ontario Institute for Cancer Research to discover, develop and distribute radiopharmaceuticals. Dr. Valliant, a McMaster chemistry and biology professor, and the centre’s founder, led the spinout.

The company benefited from key infrastructure on campus, including a cyclotron that produces isotopes, and a nuclear reactor, and it built its own manufacturing facility in the university’s innovation park. It went public in 2020 at US$17 a share but the stock sagged, bottoming out below $3 a share in 2022 as stock values for young drug developers crashed.

Fusion’s stock rose last fall, as deal activity in the space heated up and ahead of the efficacy trial results expected next month. The FDA has greenlit Fusion to start an expanded efficacy trial in 2024.

Mr. Lamb, who served as Fusion chair when it went public, said the takeover would be good for Canada and provide further returns on past government investments to make Hamilton a radiopharma centre.

“This isn’t a buy-and-move thing,” he said. “AstraZeneca is now committed to the Hamilton region. They will build out their radiopharma presence around that manufacturing facility and scale it, and it will be a global centre of excellence. Eventually, significant dollars will flow from the export of products.”

The deal “confirms that McMaster’s culture of converting research innovation into products and services that benefit society is working” and its on-campus presence “has inspired similar efforts by our colleagues in other fields,” said Leyla Soleymani, McMaster’s associate vice-president, research.

The deal, expected to close by June 30, requires two-thirds support from Fusion shareholders.

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