Eye disease drug firmhas four in pipeline

money-glitz | Stella Zhai 6 Jul 2020

Ocumension Therapeutics, a loss-making mainland biotech company, is aiming to raise up to HK$1.55 billion through a Hong Kong initial public offering.

The ophthalmic drug developer, scheduled to debut this Friday, has attracted retail investors to place over HK$90.66 billion orders, an oversubscription of 582.8 times, according to local brokers.

The issuer has finished two series of pre-IPO financing last year, raising a total of around US$200 million (HK$1.56 billion). It has invited shareholders including Boyu, 3W Partners, General Atlantic, and Singapore's Temasek, which holds 10.42 percent pre-IPO shares of the company.

The company was founded in 2018 as an incubation project under mainland healthcare private equity funds 6 Dimensions Capital, holding 55.61 percent of its shares.

Based in Shanghai, the company mainly focuses on identifying, developing, and commercializing ophthalmic therapies. It has 16 drug assets in its portfolio through in-licensing, internal discovery and acquisition, covering all major front- and back-of-the-eye diseases. The company is one of only few pharmaceutical companies in China with such full coverage, according to a commissioned Frost & Sullivan report.

But it is noticeable that more than 60 percent of the company's drug candidates are introduced from overseas drugmakers. The firm warns that its existing collaborations with licensing partners may be harmed if disagreements or disputes arise, and the company may not be able to in-license new drug candidates.

Ocumension Therapeutics has four innovative drug candidates in or near late-stage development in China. Among them, OT-401, its core product, is an intravitreal implant to treat chronic NIU-PS, an indication for which there is no standard of care in China. The firm plans to submit a new drug application for the candidate in the first half of 2022 and commercialize it in the second half of 2022 upon approval, it says in the prospectus.

The Chinese ophthalmic pharmaceutical market is expected to expand from 19.4 billion yuan (HK$20.18 billion) in 2019 to 40.8 billion yuan in 2024, at a compound annual growth rate of 16 percent, according to the Frost & Sullivan report. Also, there are only a limited number of specialized ophthalmic pharmaceutical companies in mainland China, such as Santen, Allergan, and Sinqi, most of which are multinational corporations.

The drugmaker has been developing a new facility in Suzhou, which is expected to have a capacity of up to 455 million doses annually, the largest among all specialized ophthalmic manufacturing facilities in China, says the company.

The firm only started to record revenue last year, which amounted to 190,000 yuan, while net losses surged by 5.3 times to 1.33 billion yuan in 2019. The net loss was mainly the result of a 1.1 billion yuan loss from fair value changes of financial instruments it had issued, according to the prospectus.

Research and development expenses have grown by 1.45 times from 2018 to 99.5 million yuan last year. Among them, the upfront and milestone payments under license agreements with in-licensing partners accounted for 85.2 percent and 48.4 percent of total R&D expenses in 2018 and 2019, respectively. The company warns that it may continue to incur operating losses for the foreseeable future.

The company intends to use the net proceeds for the development of core product OT-401 and other candidates, the acquisition of the manufacturing facility in Suzhou, as well as working capital and other general corporate purposes.

Morgan Stanley Asia and Goldman Sachs (Asia) are the joint sponsors of the issuance.

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