Akeso shares take a hit despite surging sales of cancer drugs

The maker of oncology drugs posted higher half-year revenues but a widening net loss and share sales by its founders have dented investor confidence

Key Takeaways:

• Drug sales rose 49% in the first half of the year, driving a nearly 38% jump in Akeso’s total revenue
• The company said detailed analysis of a pivotal trial had shown that its lung cancer drug ivonescimab could improve patient survival rates

By Molly Wen

As one of China’s leading biotechs, Akeso Inc. (9926.HK) has long been tipped for global stardom, attracting strong interest from investors.

Its share price has risen more than 150% so far this year, taking the drug maker’s market value above HK$140 billion ($17.9 billion) at one point. But the company’s latest earnings on August 26 took some of the shine off its investment appeal.

The company reported that revenues rose nearly 38% to 1.41 billion yuan ($198 million) in the first half of the year, but its net loss more than doubled from 249 million yuan in the year-earlier period to 588 million yuan in the latest accounts.

In the face of a worsening bottom line, market sentiment soured. Akeso’s stock fell 7.1% in the session after the earnings release and slipped another 3.18% on August 28. On that same day, Akeso announced a HK$3.5 billion share placement and a sale of existing shares by two company founders, further rattling investors.

The 23.55 million new shares, equivalent to 2.56% of the firm’s enlarged share capital, were priced at HK$149.54 each, a 4.75% discount to the August 28 close. The issuance was set to raise HK$3.52 billion, with about 80% of the proceeds going to fund R&D pipelines, technology platforms and related infrastructure. Meanwhile, it was announced that CEO Michelle Xia and Executive Director Baiyong Li were each selling 1.5 million existing shares at the same price, cashing out a combined sum of nearly HK$450 million.

The timing of the sale is noteworthy, announced on the same day that Akeso’s stock hit a record intra-day high of HK$179, before turning lower.

The combined sales amount to just 0.36% of outstanding issuance, and Xia’s stake only edged down from 11.4% to 10.94%. But the optics of cashing out at a price peak are less than positive for a company with widening losses. The earnings release did not indicate any pressing funding needs, with the company holding 6.59 billion yuan in cash and equivalents, leaving questions about the timing and motives for the move.

Ramping up sales of cancer drugs

Still, Akeso’s interim earnings showcased solid growth in revenues, driven by increased sales of already launched drugs. Product sales rose just over 49% to 1.40 billion yuan in the first half of 2024, serving as the engine of total revenue.

Behind this growth were two flagship bispecific antibodies used in cancer therapies –

cadonilimab (PD-1/CTLA-4) and ivonescimab (PD-1/VEGF). Both were first included in China’s national drug catalog at the end of 2024, with the resulting insurance coverage accelerating uptake. Chinese regulators gave additional approval for ivonescimab as a treatment for a type of lung cancer in April this year and cadonilimab was endorsed in June as a therapy for persistent, recurrent or metastatic cervical cancer, boosting sales. In addition, Akeso’s newly approved therapies ebronucimab (PCSK9) for high cholesterol and ebdarokimab (IL-12/IL-230) for autoimmune conditions have also started to generate sales.

Akeso has been expanding its salesforce to market the growing suite of drugs. Its team grew to 1,221 by the end of June from a year-earlier figure of 844, with selling expenses rising 30% to 670 million yuan. With the benefit of scale effects, sales and marketing expenses fell to 47.8% of product revenue, down 7.13 percentage points from the same period of last year.

Akeso blamed its widening loss on three factors. Firstly, equity investment losses from Summit Therapeutics widened to 191.7 million yuan, up 159.1 million yuan from a year earlier. Secondly, R&D expenses rose 23% to 731 million yuan, equivalent to nearly 52% of total revenue, as the company pursued multiple Phase Three trials and invested in developing new products. The third source of red ink was a jump in expenses from share-based compensation, which rose 21.9 million yuan to 27.2 million yuan from the year-earlier period.

Putting the share price volatility and stake sales aside, Akeso’s core value lies in the strength of its drug pipeline. The company recently announced that a detailed analysis of findings from a pivotal trial had shown that ivonescimab, when combined with chemotherapy, delivered a statistically significant overall survival benefit, underscoring its therapeutic potential.

Akeso currently trades at a price-to-sales multiple of about 45 times, enjoying a substantial premium over the 13 times for Innovent Biologics (1801.HK). Whether the company can hold onto that lofty valuation will hinge on the full release of data for its lung cancer drug and approvals for other conditions, with investors keeping a  close watch on the situation.

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