BEIJING – Pre-revenue Chinese biotech Akeso Inc., of Zhongshan, Guangdong province, launched a high-profile IPO on April 24 in Hong Kong to reap HK$2.4 billion (US$314 million), even though the economy is taking a hard hit from the COVID-19 pandemic. The proceeds will help advance its PD-1/CTLA4 bispecific antibody for cervical cancer, aiming to be on the market by late 2021.

Backed by Morgan Stanley and J.P. Morgan, the bispecific antibody specialist issued around 159.5 million shares at HK$16.18 per share, representing the top end of the indicative range. The IPO received an overwhelming response from retail investors, with shares significantly oversubscribed by 639.2 times. And Akeso’s share price soared 50% from its offer price to close at HK$24.3 on Friday, while the Hang Seng Index was down 0.6%.

The biotech’s strong debut came at a time when biotech stocks are seen as safe-haven assets amid the global pandemic-induced economic downturn. After Innocare Pharma Ltd.’s strong debut last month, Hong Kong investors continued to show appetite and confidence for biotech players. The lack of promising IPOs in recent months also made Akeso’s offering stand out to retail investors.

Akeso’s IPO is the strongest pre-revenue listing in recent months, after Innocare, Alphamab Oncology Co. Ltd. and Tot Biopharm International Co. Ltd. raised $288 million, $234 million and $87 million, respectively, over the past five months.

“I think we attract the retail investors because we have a solid and integrated in-house discovery and development platform, a rich pipeline, important collaborations with Merck & Co. Inc. and Sino Biopharmaceutical Ltd., and strong infrastructure and manufacturing capability,” Akeso CEO Michelle Xia told BioWorld in an exclusive interview.

After weighing the options for its pre-revenue listing, Xia decided that the HKEX was the best destination for its "East meets West" environment.

Michelle Xia, president and CEO, Akeso

“The U.S. and Chinese markets value biotech companies differently. Chinese investors show interest in drug candidates with validated targets while the U.S. investors look at how innovative the programs are,” she explained. “The Hong Kong market shares both views, and I think we can attract capital from both China and the U.S. here.”

Founded in 2012, Akeso has two potential first-in-class PD-1-based bispecific antibodies and one potential best-in-class PD-1 inhibitor in its pipeline. Its core asset is AK-104, a PD-1/CTLA4 bispecific antibody. The phase II registrational trial for cervical cancer in China had begun in September 2019, and, assuming positive results, Akeso plans to submit an NDA in the second half of 2021.

“From the economic perspective, lowering costs for patients is why we decided to develop bispecific antibodies. Since it is one drug with two functions, it is cheaper than taking two drugs,” said Xia. “We want to make drugs affordable, and this will continue to be the direction Akeso is heading in.”

From a scientific perspective, she said using PD-1 in combination with CTLA4 showed good efficacy but toxicity remained an issue, which limited the potential of using both of them as a combination therapy.

“We started to wonder if we could reduce the toxicity by designing the structure for such a bispecific antibody. Our AK-104 showed lower toxicity and better efficacy than PD-1 monotherapies in clinical trials,” Xia added.

Based on preliminary clinical data, lower incidence of treatment-related adverse events (13% grade 3 treatment-related adverse events [TRAEs] in all dose levels) was observed with AK-104, as compared with the nivolumab and ipilimumab combination therapy, according to published data. The combination therapy of nivolumab and ipilimumab revealed an incidence rate of grade 3 TRAEs of 33% to 59% in selected trials, though those trials were not conducted on the same basis as those of AK-104.

In the belief that AK-104 may take the company to the next stage as a global competitor, Akeso plans to use 30% of its IPO proceeds to advance that program. That means that the company will, for now, focus less on its second bispecific antibody, AK-112, which targets PD-1 and VEGF.

Global value

Its other priority is to turn losses into profits via its PD-1 drug candidate AK-105, the most advanced program in its pipeline.

Last year, the company recorded HK$378 million in losses.

The PD-1 market in China is already crowded with six already approved products, making Akeso a late arrival to the field.

However, the biotech said AK-105 is differentiated from all of the currently marketed PD-1 antibodies. It has a differentiated structure design that removes the Fc-receptor-mediated effector function to increase antitumor activities and leads to a slower off-rate and better receptor occupancy.

Xia said she is also confident that the partnership with Sino Biopharm to commercialize AK-105 will help the biotech win a place in the market. Sino Biopharm has a sales team of about 12,000 professionals.

“In the PD-1 race in China, the next step is really about your commercialization strategy,” she said. “Sino Biopharm has strong commercial capabilities, which will bring us to a higher level of competitiveness.”

Xia said she also believes the future battle for PD-1 drugs will be in combination therapy. “Currently, lots of efforts have been on developing combination therapies, and the industry was encouraged to see Merck’s results in combining Keytruda with chemotherapy,” she said. “Likewise, we’re investigating our AK-105 in combination with chemotherapy and with Sino Biopharm’s anlotinib, a multitargeted tyrosine kinase inhibitor, for non-small-cell lung carcinoma.”

That said, much of its focus is on PD-1 for now, which puts Akeso’s capability and willingness to innovate at question.

Xia explained that the company started by focusing on validated targets that came with lower risks to increase its chance of success. Later on, it took more risks by developing bispecific antibodies. “Although these targets are validated, putting them together as a new structure still carries high risks,” she said.

The company’s R&D focus will later extend to more innovative targets, Xia stated.

“Now we have a strong pipeline, we will most likely commit to discovering more innovative targets. We need to think about what kind of company Akeso will become in a few years, so it is time to emphasize innovation more than ever in order to go global,” she said. “Our product portfolio needs to carry global value rather than just catering to the Chinese market.”

In Akeso’s current pipeline are IL-12/IL-23 monoclonal antibody AK-101, IL-17 monoclonal antibody AK-111, and PCSK9 inhibitor AK-102. Overall, the biotech’s pipeline includes more than 20 drug development programs, including 12 in clinical-stage development.

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