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Biotechnology (NASDAQ: LIAN) was a rising star in China’s pharmaceutical industry, but the drug startup stalled just four years after its launch.
Shortening life cycles of biotech highlight challenges and costs Even with funding and ambitious goals, it’s possible to bring new drugs to market.
The company’s mission is to acquire the rights to drugs in late-stage development and bring them to the mass market in China. Liantuo Biotech is a typical representative of this so-called “authorized introduction” model. In 2020, the company received US$310 million in financing just two months after its establishment.
A year later, it went public on Nasdaq, raising another $325 million.However, after conducting a strategic review of its business, Liantuo Biotech declare Last Tuesday, the company was winding down most of its operations and delisting It will be listed on Nasdaq at the end of this year. It then plans to complete the remaining operations within the next three years.
Liantuo Biotech stated in the announcement that it will sell the remaining pipeline around March 11, gradually stop ongoing clinical trials, and pay a special dividend of US$4.80 per share, totaling approximately US$528 million. Once the sale of the remaining assets is completed, the profits will be distributed to shareholders.
The company plans to lay off more than 50 employees, or about 50% of its workforce, in the first quarter, but said it will retain a core employee for now to ensure orderly layoffs and help maximize the value of remaining assets. The business will eventually be dissolved in the first half of 2027.
The company plans to submit a delisting application to the U.S. Securities and Exchange Commission around March 8, with a view to delisting from Nasdaq around March 18. Still, some investors see profit opportunities in the company’s exit strategy. On the day of the announcement, Liantuo Biotech’s share price soared 18.8% to close at US$4.80, which is the level of the proposed special dividend.
However, investors who bought into the original IPO will lose 70%. Liantuo Biotech will be listed in November 2021 with an issue price of US$16. The stock fell 14.4% on its first day and has been in a downward spiral ever since. It has been hovering around US$3 for a long time after May 2022, hitting a low of US$1.33 in October last year, with a market value of only US$140 million.
In its most recent financial report ReportLiantuo Biotech announced a net loss of US$69.7 million in the first three quarters of 2023, compared with a loss of US$92 million in the same period last year. The company still holds a cash reserve of US$252 million. The combination of low market value and good cash flow attracted the attention of “vulture capitalist” Tang Capital in early December last year. The hedge fund acquired 80% of the company’s project net proceeds at a price of $4.30 per share, but required Liantuo Biotech to ensure that no less than $515 million in cash and cash equivalents remained on the books at the time of closing. Ultimately, the board of directors of Liantuo Biotech rejected the offer on the grounds that it undervalued the company.
Market progress is slow
The special dividend of $4.80 per share promised by Liantuo Biologics exceeds the amount offered by TANG-Capital for the pharmaceutical company, which was founded and led by U.S. private equity fund Perceptive Advisors. The life sciences investor founded Liantuo Biotech, hoping to introduce overseas high-quality and clinically proven drugs to China to meet the needs of the world’s second largest pharmaceutical market.
LianBio is off to a strong start, in-licensing nine products from other drug developers ahead of launch in 2021. Conditions targeted by these drugs include cardiovascular and kidney problems, cancer, eye disease, inflammation and respiratory disease. Most of the acquired product lines are in late clinical stages, and the company will complete trials and launch products commercially in mainland China.Peers such as Everest Pharmaceuticals (1952.HK) and Zai Lab (ZLAB; 9688.HK) follows a similar model.
But four years after its establishment, Liantuo Biotech still does not have any products that have crossed the commercial threshold, which may reflect a lack of internal R&D capabilities. Of the nine pipelines, Mavacamten has made the most progress as a heart disease drug. The drug had completed Phase II clinical trials before being acquired from MyoKardia in 2020, and was approved for marketing in the United States in April 2022. But despite progress globally, the drug only completed Phase III clinical trials in China last August.
After the drug is approved for marketing, Liantuo Biotech faces the prospect of investing a large amount of money to form a commercialization team.Instead, the company licensed in China Bristol-Myers Squibb Last October, BMY acquired the company for $350 million. After deducting the $40 million payment for the drug, LianBio netted $310 million from the deal. LianBio acquired another drug candidate targeting the respiratory virus RSV in 2021 for an upfront payment of $14 million.The drug Sisunatovi is sold Pfizer (PFE) will pay an initial payment of $20 million and milestone payments of $135 million in 2022.
The deals show that Liantuo is good at selecting promising drugs and acting as an industry middleman, but they also highlight its shortcomings as a drug maker. Among companies with similar business models, Everest Medicines, a biomedical investment fund incubated by Cambridge Capital, has launched a number of star products, including the powerful antibacterial drug Xerava and the world’s first kidney disease targeted drug Nefecon. EnA nephropathy.
Therefore, investors can learn an important lesson from Liantuo’s short lifespan: if the company can discover excellent drug candidates and follow up with R&D and marketing expertise, then the licensing model is entirely feasible.
Reveal: not any.
