Losses widen at cancer drug maker

Money Glitz | Avery Chen 19 Aug 2019

Ascentage Pharma, a mainland clinical-stage biotechnology company, is seeking to list in Hong Kong to raise between US$200 million (HK$1.56 billion) and US$300 million.

The Jiangsu-based company is mainly engaged in developing novel therapies for cancer, hepatitis B virus, and age-related diseases.

Ascentage Pharma has eight drug candidates in clinical development, 20 ongoing clinical trials and 18 investigational new drugs filed globally.

The company has two candidates in phase two clinical trial, including its core product HQP1351, for treatments of patients with chronic myeloid leukemia (CML) - a type of cancer that starts in certain blood-forming cells of the bone marrow - and tyrosine kinase inhibitors (TKI) resistant. About 15 percent leukemias in adults are CML, according to the American Cancer Society.

TKIs are a substance that blocks the action of enzymes called tyrosine kinases, which plays an integral role in regulating cellular functions, including cell signaling, growth, and division. These enzymes may be too active or found at high levels in some types of cancer cells, and blocking them may help keep cancer cells from growing, according to the United States National Cancer Institute.

Ascentage Pharma's HQP1351 is the third generation BCR-ABL inhibitor in its TKI pipeline. And the first-generation TKI, Glivec, or Imatinib, has been well-known after low-budget Chinese film "Dying to Survive" came out last year and became one of the highest-grossing films in the country's movie history.

In China, there were 4.3 million new cancer cases in 2018, or 23.7 percent of the global cancer patient population, according to Frost & Sullivan. And the oncology drug market in China has lagged behind other major industrial countries due to limited access to new drugs. With growing regulatory support for the introduction of domestic and foreign innovative new cancer drugs, the value of the world's second-largest pharmaceutical market is expected to grow from US$23.8 billion in 2018 to US$99.8 billion in 2030.

Ascentage Pharma's revenue fell by 17.47 percent year-on-year to 6.33 million yuan (HK$7.08 million) in 2017 and slightly rallied by 7.58 percent to 6.81 million yuan. The drugmaker generated revenue from research and development services, compounds library license fee income and an intellectual property license fee income in 2016. It expects revenue from the R&D services to drop as it continues to dedicate resources to its own clinical candidates.

And the company is unprofitable as it has not commercialized any product candidates.

Although Ascentage Pharma has completed four rounds of financing for 1.6 billion yuan, net loss continued to widen, increasing by 1.92 times year-on-year to 345.2 million yuan last year. This was a result of costs incurred in R&D programs and from general and administrative expenses associated with operations.

The R&D expenses grew by 15.7 percent year-on-year to 118.82 million yuan in 2017 and further surged by 1.1 times to 249.57 million yuan last year.

Meanwhile, in April this year, Ascentage Pharma entered into a clinical collaboration agreement with Junshi Biosciences (1877), another non-profitable biotech firm that listed at the end of last year, to explore the synergies of its APG-1387, an apoptosis protein inhibitor, and Junshi Biosciences' core product toripalimab, an anti-PD-1 therapy, one of the hottest cancer drugs, in clinical trials in China.

Ascentage Pharma intends to use the net proceeds for R&D to bring its core product HQP1351 into commercialization, to cover R&D expenses for other drug candidates, and for working capital and general corporate purposes.

Bank of America Merrill Lynch and Citi are co-sponsors of the deal.

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