A-List Executive Team, Big-Name Backers Fail to Lift Abbisko IPO

Shares of cancer drug startup, whose investors include Carlyle Group and Temasek, are down 7% a week after their trading debut

Key takeaways

• Four rounds of fundraising together with IPO proceeds have given the Abbisko a cumulative war chest of almost $500 million
• Company is betting a significant portion of its funds on China rights to an AstraZeneca drug to treat multiple solid tumors

By Richard Barbarossa

When it comes to startup drug makers, a strong executive lineup and big-name backers are often just as important as a company’s products while those products are still in development and profits have yet to start flowing.

That’s definitely the case for newly listed cancer treatment developer Abbisko Therapeutics Co. Ltd. (2256.HK), whose A-list of backers includes global investment giant Carlyle Group and Singapore’s Temasek sovereign wealth fund. The company raised $226 million in its Hong Kong listing last week, a lofty figure that could reflect confidence in the wealth of experience among its top executives, despite a dearth of products for sale.

Reflecting the challenges ahead, however, the stock dipped slightly on its first trading day, and has moved steadily downward since then.

Founded in 2016, the Shanghai-based company has five clinical-stage small molecule oncology therapies and immune-oncology treatments in development. Similar to the case for many other Chinese biomedical startups, none of the company’s drugs have been approved for sale and thus it doesn’t generate any revenue, let alone profits.

But that hasn’t discouraged investors, who see its potential in a global oncology drug market that’s expected to grow at a compound annual rate of 10.5% from $150.3 billion in 2020 to US$670.4 billion in 2035, according to third-party data cited in the company’s prospectus.

Before the listing last week, Abbisko largely relied on capital from four rounds of fundraising, including the latest in January that added $123 million to its coffers from Carlyle, as well as big-name investors Warburg Pincus and OrbiMed, among others. That brought its total pre-IPO fundraising to $263 million, according to startup company data site Crunchbase.

The company’s shares lost as much as 13% on their initial trading day from their IPO price of HK$12.46, before bouncing back and finishing down slightly last Friday. Following more modest declines in the following days they now trade about 7% below their listing price.

With a current market cap of HK$8.15 billion ($1.04 billion), the company is technically a “unicorn,” though a small one that ranks squarely as a minnow among its peers. By comparison competitor BeiGene Ltd. (BGNE.US; 6160.HK) has a market cap of $34.8 billion, while Hutchmed (China) Ltd. (HCM.US) is valued at $5.6 billion.

Abbisko’s current in-house clinical team numbers just 20 scientists and physicians, although it has set a target to boost that tenfold to 200 by 2023. A big part of its appeal may come from its senior leadership team, which includes a slate of executives with strong backgrounds at global drug powerhouses with track records of guiding pipeline drug candidates to market.

All-Star Founders

The company’s three co-founders can claim contributions to a large number of drug discovery programs, including at least eight that led to eventual commercialization.

Co-founder and CEO Dr. Xu Yaochang is a prime example. Prior to joining Abbisko, Xu served as executive director and head of chemistry at Novartis China, and director of chemistry at Eli Lilly (LLY.US) in Indiana. He also served as general manager of Hansoh Pharmaceutical Co. (3692.HK), where he built the R&D team and guided more than 10 innovative programs from discovery to clinical development, spanning oncology and virology.

Senior vice president of biology Dr. Chen Zhui also brings strong international experience, having previously served as head of liver cancer discovery and translational research and later lung cancer discovery at Johnson & Johnson China R&D (JNJ.US). He was also an investigator of epigenetic drug discovery and leader of oncology translational research at Novartis China and senior scientist at Abbott Laboratories (ABT.US) in the U.S.

Notably, Chen contributed research for Venetoclax, another cancer drug which is used to treat chronic lymphocytic leukemia. Global sales of the drug at AbbVie Inc. (ABBV.US), where it is marketed as Venclexta, jumped almost 70% last year – the largest increase of any of the company’s drugs not including those launched the previous year- to $1.3 billion.

Rounding out the trio at the top is Yu Hongping, senior vice president of chemistry, who also worked at Hansoh Pharmaceutical prior to co-founding Abbisko. He also served previous stints as senior investigator at Novartis and research chemists at Merck (MRK.US).

Two out of Abbisko’s five drug candidates were obtained through licensing agreements with foreign drug makers for use of either their approved or pipeline treatments in other countries that usually can get quick approval in China and start generating cash flow, a common practice among drug startups.

That’s the case for Abbisko’s main drug candidate ABSK091 used for the treatment of multiple solid tumors, including urothelial, gastric, endometrial and lung cancers. The company licensed the molecule from AstraZeneca in November 2019 after the Sweden-based company discontinued its development of the treatment to focus on other drugs. Abbisko completed a phase I study in Taiwan in March this year.

Reflecting the drug’s importance to its business plan, Abbisko said it planned to use about 33% of the funds it raised in the IPO for ongoing R&D, approval for use and eventual commercialization of ABSK091.

It’s most advanced drug candidate in the approval process in China is ABSK081, an oral treatment for patients with WHIM syndrome, a rare immunodeficiency disorder where the immune system doesn’t function properly. Rights to develop that drug for the mainland China, Hong Kong, Macau and Taiwan markets were also acquired via an exclusive licensing agreement with Boston-based X4 Pharmaceuticals Inc. (XFOR.US) in 2019.

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