HONG KONG – Undeterred by the underperformance of peers on the Hong Kong Stock Exchange, Suzhou's Cstone Pharmaceuticals Co. Ltd. filed for an IPO on Monday, becoming the 16th biotech company to seek a listing in Hong Kong under the new rules. Proceeds will be used to advance its core asset, CS-1001, aiming to be one of the first PD-L1 antibodies approved in China.
Founded in 2015, Cstone has focused on developing and commercializing immuno-oncology (I-O) and molecularly targeted drugs. It now has 14 drug candidates in its oncology-focused pipeline, with eight at clinical stage.
Prior to the IPO filing, the Chinese drugmaker raised $410 million in total from well-known investors such as Singapore's sovereign wealth fund GIC Private Ltd., Sequoia China, and a slew of others.
In May, it pocketed $260 million in the largest series B financing in the history of China's biopharmaceutical industry, after raising $150 million in 2016. (See BioWorld, May 14, 2018.)
In its pipeline, Cstone has three in-house I-O backbone assets, which are PD-L1, PD-1 and CTLA-4 antibodies, as well as one MEK inhibitor and four in-licensed assets at the clinical stage, plus six preclinical drug candidates.
With such an extensive pipeline, Cstone expects to see around 28 ongoing or completed trials in China and globally by the end of 2019. Its research and development expenses amounted to ¥508.7 million (US$73.1 million) for the six months ended June 2018, while its income for the same period was only ¥4 million.
To minimize the gap, raising capital in the public market seems inevitable. However, it is not immediately clear how much Cstone aims to raise in the Hong Kong public market.
CS-1001: Blockbuster potential
As Cstone's core product candidate, CS-1001 is a full-length, fully human IgG4 monoclonal antibody against PD-L1 for treating various cancers. While it obtained IND clearance from the FDA and will enter clinical trial in the U.S. by 2018, Cstone's near-term goal is to secure marketing approval in China to treat classical Hodgkin lymphoma and natural killer/T-cell lymphoma, in late 2019 and early 2020, respectively.
As a monotherapy, CS-1001 is in a phase III study for treating stage III non-small-cell lung cancer (NSCLC). It may be used in phase III trials in combination with standard-of-care therapies in China for treating patients with stage IV NSCLC by the end of 2018, with studies in gastric cancer in the first half of 2019 and hepatocellular carcinoma (HCC) in the first half of 2019.
According to market intelligence firm Frost & Sullivan, the total incidence of those indications in China was 1.2 million in 2017, implying vast opportunity for CS-1001.
The other two backbone assets are CS-1002, a CTLA-4 antibody, and CS-1003, a PD-1 antibody. Both are in the IND filing stage in China and phase I testing in Australia.
CS-1002 has the same amino acid sequence as Yervoy (ipilimumab, Bristol-Myers Squibb Co.), which could match its clinical activity and safety profile. Meanwhile, CS-1003 is being developed as a monotherapy for rare and sensitive tumor types and has gained IND approval from the FDA.
The Chinese firm also in-licensed four assets from two U.S. companies to enrich its pipeline. To obtain rights for greater China, Cstone paid U.S. firms Agios Pharmaceuticals Inc. and Blueprint Medicines Corp. $12 million and $40 million up front, respectively, in June. (See BioWorld, June 27, 2018.)
From Agios comes CS-3010 (ivosidenib), while the Blueprint deal adds CS-3007 (avapritinib), CS-3008 (FGFR4 inhibitor) and CS-3009 (RET inhibitor). All have proof of concept for their lead indications based on clinical data from U.S. trials. Cstone is using those data to seek faster marketing approval in China, as overseas data are now accepted.
Ivosidenib was approved as Tibsovo by the FDA in July 2018 as the first treatment of IDH1-mutant relapsed or refractory acute myeloid leukemia in its class globally. (See BioWorld, July 23, 2018.)
Meanwhile, the company said it will continue to advance its six preclinical assets toward IND, including CS-3002, a CDK4/6 inhibitor, and CS-3003, an HDAC6 inhibitor.
And, like other firms in the space, Cstone has adopted a strategic emphasis on I-O combination therapies. CS-1001 will be studied in combination with CS-3008 for treating HCC, with a PARP inhibitor for solid tumors, with CS-3002 for solid tumors or multiple myeloma, and with CS-3003 for solid tumors or multiple myeloma. All those phase I trials are expected to begin in 2019.
The in-licensed assets may also be used to complement CS-1001. Cstone plans to combine the PD-L1 antibody with CS-3010 for cholangiocarcinoma, with CS-3009 for NSCLC, and with CS-3007 for gastrointestinal stromal tumors.
Cornerstone investors key
In the little more than six months since the Hong Kong Stock Exchange began welcoming pre-profit biotech companies, 14 Chinese and two U.S. firms have filed for IPOs.
However, most newly listed firms have not been performing strongly for investors.
As of Nov. 13, Ascletis Pharma Inc'.s (HKG:1672) share price had fallen 40 percent from its IPO price to HK$8.45 (US$1.08); Beigene Ltd. (HKG:6160) was down 36 percent to HK$68.15; and Hua Medicine Ltd. (HKG:2552) had slid nearly 10 percent to HK$7.67.
An exception is Innovent Biologics Inc. (HKG:1801), having climbed 8 percent to HK$18.02.
"What made Innovent's new listing stand apart was its large size, as well as the fact that it had secured cornerstone investors for more than 60 percent of the transaction, including high quality names such as Fidelity and Singapore's Temasek," Philippe Espinasse, an investment banking expert and former head of equity capital markets at Nomura, told BioWorld.
To Espinasse, cornerstone investors are the key to making valuation more realistic.
"As a result, a number of accounts were scaled back, and had to top up their allocations upon start of trading, creating positive momentum for the share price," he added.
While the Nasdaq and mainland China stock markets have been welcoming biotech companies, the players seem to still favor Hong Kong.
"There is a long history of biotech new listings in the U.S. Many Chinese companies, however, choose to pursue a flotation in Hong Kong as it is closer to home, but with the added convenience of raising funds in an offshore jurisdiction, as well as in Hong Kong dollars," Espinasse said.
Currently, there are 12 listing candidates, including Ascentage Pharma, Liaoning Chengda Biotechnology Co. Ltd. and Wuxi Apptec Co. Ltd.