After One-Off Cash Infusions, YZY Biopharma Looks for More Funds From IPO

Key Takeaways:

• YZY Biopharma has filed for a Hong Kong listing, seeking to raise fresh funds as its most advanced drug is unlikely to start generating revenue anytime soon
• The company had just 53.79 million yuan in cash by the end of June, forcing it to sell shares and one of its products to keep funding its operations

By Molly Wen

Among innovative drugs, bispecific antibodies (BsAbs) are considered a successor to older monoclonal antibodies (mAbs), posting explosive growth this year as the U.S., EU and China approved at least four new products. At least seven such drugs have come to market since the first was approved in 2009, used to treat cancer as well as rare and autoimmune diseases.

But that big potential is doing little to help Wuhan YZY Biopharma Co. Ltd., a specialist in BsAbs and immuno-oncology therapies, which filed for a Hong Kong IPO on Dec. 9. With dwindling cash and no chances of product revenue in sight, the company is living from funding to funding as it tries to carve out a place in the potentially lucrative but also cash-consuming field.

Founded in 2010, YZY has 10 treatments under development and five in the clinical trial stages, targeting a wide range of diseases including malignant ascites, myeloma and pancreatic cancer. Its most advanced product, called M701, is in stage 2 clinical trials for the treatment of malignant ascites and isn’t expected to begin stage 3 trials until the first half of 2024.

The company also hopes to carve out a place in the enormous Covid-19 vaccine market, working with the Wuhan Institute of Virology to develop the recombinant protein vaccine Y2019. But that vaccine only finished its stage 1a clinical trials in August, and won’t start early clinical trials until the second half of next year. Even if it eventually makes it to market, it will have to vie with 13 vaccines already approved in China, meaning it’s quite late to that party.

Revenue challenged

Despite lots of material in its pipeline, YZY resembles many of the companies in China’s bustling field of innovative drug developers in having no products on the market yet, and thus no recurring revenue. And like all those peers, its losses are piling up as it continues to spend heavily on R&D. In the past two years, the company registered losses of 108 million yuan ($15.5 million) and 149 million yuan. The figure grew further still to 89.63 million yuan in the first half of 2022, up 58% year-on-year.

If it successfully lists in Hong Kong, the company plans to use its new funds to further develop its candidate drugs, for clinical trials and commercialization, as well as for further improvement of its BsAb technology platform. According to a research report published by Southwest Securities, the global BsAb drug market approached $4 billion by the end of last year as such drugs were approved for a broader scope of indications and showed good clinical efficacy and safety. It forecast the market would grow rapidly as more drugs get approved, reaching $80.7 billion by 2030.

BsAbs are artificial antibodies that can simultaneously combine with two specific antigens or antigenic epitopes, the result of fusing two different antibody structures. They are more specific and targeted than first generation monoclonal antibodies and their required dosages are typically low. But development of such drugs is very technologically demanding since it requires DNA recombination and cellular fusion technologies and involves the designs of complex molecular structures.

Among Chinese companies with proprietary BsAb technology platforms, YZY Biopharma ranks first in terms of its progress in developing T-cell combined BsAbs, including its number of such drugs, according to its prospectus. China’s other leading BsAb development platforms include Evive Biotech’s iTAB, Alphamab Oncology (9966.HK)’s CRIB, EpimAb Biotherapeutics’ FIT-lg and Adagene’s ADAG’s DPL.

In addition to developing its own drugs, YZY hopes to get orders from third-party partners for use of its BsAb tech platform. In one such tie-up, Adagene and Sanofi SNY announced in March they would work together to develop multi-target antibody candidate drugs. Under the partnership, Adagene will lead initial R&D for new products using its antibody platform, while Sanofi will oversee later development and commercialization. Adagene can earn an initial upfront payment of $17.50 million from the partnership, which could ultimately produce revenue of up to $2.5 billion.

Cash raising

Despite the strong prospects for its future products, YZY’s financial situation in the present looks far from reassuring. It had only 53.79 million yuan in cash at the end of June, down 35% from the 83.09 million yuan in its coffers at the end of 2021. If it keeps spending money at its current rate, with R&D expenses totaling 82.36 million yuan in the first half of the year as an indicator, it might not have enough cash to see its first products to market, let alone for commercializing them.

The company is trying to tide itself over by raising cash through the sale of some of its current products in development. In July, it transferred all rights and assets related to Y400 to China Medical System (0867.HK), receiving a down payment of $5 million. Y400 is a BsAb that targets diseases in the elderly, and is currently in the pre-clinical trial stage of development. The company also finished a series-C funding worth 200 million yuan in October.

The Y400 sale and series-C funding did some – but not much – to relieve YZY’s financial stress, bringing its cash to 78.30 million yuan at the end of October. The company has completed five funding rounds to date, raising a total of 670 million yuan, and has said it can do another pre-IPO fundraising if necessary.

YZY sold shares for 14.29 yuan apiece in its latest funding round, valuing it at approximately 2.6 billion yuan. Two of its peers, Alphamab Oncology and Akeso Inc. (9926.HK), are valued at HK$9.3 billion ($1.2 billion) and HK$34.2 billion, respectively. Neither of those two are profitable yet, but both have successfully brought products to market, including Akeso’s launch of the first China-developed BsAb. The success of YZY Biopharma’s IPO could largely hinge on its ability to convince investors it’s not too much further behind those two rivals.