GlaxoSmithKline PLC (NYSE:GSK), Johnson & Johnson (NYSE:JNJ) – With Zero Revenue, Laekna Plays Chicken-And-Egg Game With Investors

Key Takeaways:

• Laekna is looking for a Hong Kong IPO to boost funds to speed up the commercialize two core merchandise licensed from Novartis
• The corporate at present shouldn’t be producing any sale, with most of its merchandise in early phases of growth

By Tina Yip

For buyers, Laekna Inc. is a little bit of a chicken-and-egg drawback. The biotechnology firm is producing zero income as a result of it has no product to promote. To hurry up the event of merchandise to promote, the drugmaker needs to boost funds via an IPO. However for buyers, it’s a high-risk gamble to purchase right into a revenue-less enterprise with no promise of success.

Laekna, based simply six years in the past, is engaged on an IPO in Hong Kong, with China Worldwide Capital Company as the only real sponsor. The corporate is looking for to make use of the proceeds from the share sale to speed up the medical growth and commercialization of two medicine licensed from Novartis, in line with its IPO prospectus filed to the Hong Kong Inventory Change final week.

With the IPO plan, Laekna is trying to be a part of a protracted checklist of biotech firms which have gone public in Hong Kong up to now few years, luring ample sizzling cash. Though the sector’s IPO increase has cooled, there are nonetheless greater than 30 firms within the pipeline, along with two which have efficiently listed their shares within the metropolis this yr.

A standard characteristic of those firms is that they aren’t producing income, not to mention making income. And Laekna isn’t any exception. The corporate doesn’t have any product accepted on the market and has misplaced greater than 1 billion yuan ($149 million) up to now two years.

A big a part of the loss is attributed to falls within the truthful values of economic devices however like different biotech companies, Laekna is within the enterprise of burning money for R&D. Final yr, Laekna’s R&D spending greater than doubled to 173 million yuan from 2020. And it didn’t assist that its administrative expenditure additionally shot up practically 170% to just about 52 million yuan. 

Novartis-licensed medicine

Laekna has 14 merchandise below growth however the two Novartis-licensed medicine – one for the therapy of prostate most cancers and the opposite for prostate and breast most cancers – maintain essentially the most promise, as they’re in essentially the most superior phases of medical growth, whereas the others are method behind.

This additionally implies that loads rides on the 2 merchandise, codenamed LAE001 and LAE002, as the corporate’s existence will be in jeopardy if it fails to finish the medical growth of the medicine or acquire regulatory approval for them.

Laekna has obtained a complete of about $220 million from establishments together with Novartis in six rounds of fund-raising up to now six years. The final funding by State Improvement & Funding Corp. in April put the corporate’s worth at $538 million.

One factor that has helped Laekna entice institutional buyers is the credentials of its key executives. Lu Xiangyang, the founder and chairman of Laekna, has greater than greater than 20 years of expertise. Most notably, he hailed from Novartis, the place he led analysis for liver illness medicine, amongst different achievements. As well as, the corporate’s medical operation director beforehand labored for Pfizer (NYSE: PFE)and different giant pharmaceutical firms, whereas its chief medical officer is an alum of GlaxoSmithKline (NYSE: GSK) and Johnson & Johnson(NYSE: JNJ).

However for strange buyers, placing their cash in Laekna entails quite a lot of danger. The 2 core merchandise might look promising however it’s at all times potential one thing can go mistaken, throwing a wrench within the firm’s plan to commercialize them. And the remainder of its product portfolio is simply too removed from medical growth for the drugmaker to fall again on, in case it fails to commercialize the 2 medicine as deliberate for any purpose. Plus, as a result of most of Laekna’s merchandise are in early phases of growth, it doesn’t have a confirmed R&D functionality that can provide buyers religion within the firm. 

The efficiency of biotech shares in Hong Kong isn’t inspiring confidence both. Amongst 44 such shares, 40 are buying and selling beneath their IPO costs, and a few have misplaced greater than half of their values since their itemizing. Jiangsu Recbio Expertise (2179.HK) and Lepu Biopharma (2157.HK), the 2 biotech firms that accomplished IPOs in Hong Kong this yr, are already within the purple as nicely.

Timing isn’t so nice for Laekna both, as charge hikes within the U.S. are flushing out sizzling cash. If Laekna’s capability to efficiently commercialize its two Novartis-lincesed merchandise and begin producing income hinges on whether or not it will possibly increase new funds, the Hong Kong IPO is vastly vital for the corporate’s future. However an organization with out gross sales is a tough promote for buyers, irrespective of the way you slice it. Laekna’s IPO ambition appears to quantity to squaring the circle.