TransThera Seeks Hong Kong IPO To Sustain Cancer Drug Research

Key Takeaways:

• The company’s main revenue over the past decade came from a licensing-out deal with a South Korean company that lapsed last year
• TransThera reached a valuation of 4.59 billion yuan after its D+ financing round in 2023 and is making its second attempt at a Hong Kong IPO

By Molly Wen

Hong Kong’s biotech fever subsided last year, slowing the IPO pace in the drug sector. But some pharmaceutical companies with pressing needs for capital are still keen to list there, after tighter rules made mainland exchanges a tougher option.

One eager entrant is cancer drug developer TransThera Sciences (Nanjing) Inc., which has filed for a second time to list in Hong Kong after an extended run of financing rounds.

The company has yet to bring any products to market, but it has six drug candidates in clinical trials and one in pre-clinical trials, focusing on small-molecule therapies for cancer, inflammatory conditions and cardio-metabolic diseases.

The preliminary prospectus described the company’s core drug, tinengotinib, as a multi-target kinase inhibitor designed to treat a range of tumors that have not responded to other therapies.

The drug is expected to complete a clinical trial in China in the second half of 2025, clearing the way for a marketing application. But by this timetable, commercial revenue will not start to flow before 2026.

Tinengotinib has the potential to treat relapsed or refractory tumors including gastric, prostate and breast cancers. According to the filing, it is the only drug at the clinical trial stage specifically targeting recurrent or drug-resistant bile duct tumors in patients with mutated FGFR receptors, which allow cancer cells to grow and spread. A research report cited in the prospectus found there were about 280,000 patients with cancer of the bile duct last year around the world, of which about 25% had FGFR mutations.

A market of around 70,000 is not very big for a cancer drug, and TransThera will face competition from other treatments.

U.S. drug regulators have cleared three FGFR inhibitors for cancer of the bile duct, while China has approved pemigatinib from Innovent Biologics (1801.HK) in the same category. But TransThera’s prospectus said the FGFR inhibitors currently on the market were unable to overcome a build-up of drug resistance, leaving tinengotinib as a potential option for intractable tumors.

The company was founded in 2014 and two years later its current chairman and CEO, Frank Wu, took a stake. A first phase of clinical trials for tinengotinib began in the United States In 2018 and accelerated from there. The prospectus said Wu had worked for more than 27 years in the biopharma industry, serving as chief scientist at Sihuan Pharmaceutical (0460.HK) from 2014 to 2015 and gaining management experience in the drug sector.

Licensing Out

Lacking any product revenue, TransThera relied on a licensing-out deal for most of its income in the past decade. The company entered into a partnership agreement with LG Chem in August 2020 giving the South Korean company exclusive global rights to develop an experimental drug for liver disease, TT-01025, outside of China and Japan for a down payment and milestone fees totaling $350 million. Phase one clinical trials of TT-01025, concluding in April 2022, found the drug was safe and well tolerated and could proceed to further development.  But the cooperation agreement ended in 2023, with no reasons for the decision given in the IPO filing.

The company accelerated its financing efforts from 2016, bringing in new investors almost every year. To date it has completed nine financing rounds in amounts ranging from 30 million yuan ($4.14 million) in the first fundraising to a high of 643 million yuan in the D series. Last February it wrapped up a D+ round, adding 260 million yuan to the pot and taking its valuation to 4.59 billion yuan.

A look at the shareholder roster reveals that much of the money has come from the municipal government of Nanjing, where the company is based, and from government-affiliated industrial funds, including Jiangbei Fund and Nanjing Innomed Capital. Backers also include institutional investors such as Bank of China Capital.

The company needs sustained external financing to maintain its drug development, hence its renewed interest in a Hong Kong listing after failing three years ago in its first attempt. Meanwhile, China’s mainland markets have seen a sharp drop-off in IPOs this year after tighter listing criteria raised the bar for some start-ups.

TransThera earned revenue of 124,000 yuan in 2022 and 1.18 million yuan last year, as the cooperation with LG Chem generated limited income. With substantial R&D outgoings, it made a loss of 252 million yuan in 2022 and sank 343 million yuan into the red last year. By the end of 2023, TransThera held cash and cash equivalents of only 497 million yuan, while its R&D spending will keep growing as the drug pipelines progress.

The company said it planned to use 61% of the IPO proceeds to develop tinengotinib, while just over a fifth of the money would support R&D for other products. Of the rest, 8.6% would go towards building commercialization capacity and 10% would be used as general working capital.

Details of the offering have not been disclosed, but loss-making biopharma companies without any marketed products do not tend to command high valuations in Hong Kong. Genor Biopharma (6998.HK), which listed in 2020, is a prime example. The company has launched one commercialized product but did not make any revenue in 2023. Its market value has shrunk from HK$11.5 billion at the time of its listing to just HK$500 million ($64 million). On that basis, TransThera looks to have its work cut out to beat its post-financing valuation.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.