Ascletis files for Hong Kong IPO as floodgates open to prerevenue biotechs

The logo of Hong Kong exchange HKEX. (HKEX)

Ascletis Pharma has become the first company to seek to list (PDF) in Hong Kong under the exchange’s new, more relaxed rules on biotech IPOs. The antiviral disease specialist will use the cash to win approvals for hepatitis C drugs licensed from Roche and Presidio Pharmaceuticals.

Hangzhou, China-based Ascletis has built a pipeline of antivirals by raising $155 million in venture funding from backers including C-Bridge Capital and using it to hoover up assets from Western drug developers. The strategy has played on the divergence in the size of the hepatitis C opportunities in the West and China, which has yet to go through the Sovaldi-spearheaded revolution seen elsewhere.

Ascletis wants to drive such a change in how hepatitis C is treated in China. The recent approvals of direct-acting antiviral agents have created new therapy options for the estimated 25 million hepatitis C patients in China. And Ascletis wants to further expand their choices in the months to come.

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First up is danoprevir. Roche paid InterMune $175 million to buy the small-molecule NS3/4A protease inhibitor in 2010 only to see Gilead swallow the Western hepatitis C market. Ascletis picked up the Chinese rights to the drug in 2013, before going on to link it to a 97% 12-week cure rate. The biotech expects to bring the drug to market in China in the third quarter.

Ascletis plans to file an NDA for its second hepatitis C drug, ravidasvir, around the same time. When added to a danoprevir-based regimen, the NS5A inhibitor dialed up the cure rate to 99%. The cure rate in patients with baseline NS5A resistance mutations hit 100%.

Those figures represent major improvements over the cure rates achieved by the interferon-based regimens that have dominated the Chinese hepatitis C market. Ascletis can also point to the shorter treatment duration and superior side effect profile of its assets, suggesting it can make a similar case to the one that turned hepatitis C into a blockbuster franchise at AbbVie and Gilead.

RELATED: Medivir sells Chinese rights to hepatitis C drug to Ascletis

Ascletis isn’t the only company making that pitch, though. AbbVie, Bristol-Myers Squibb and Gilead have won Chinese approval for interferon-besting hepatitis C regimens over the past year or so, and they and others have more filings on the go.

Management at Ascletis thinks its treatments have an edge over those of some of the competitors. Ascletis is also the most advanced domestic company in the race, although it remains to be seen whether that will give it an edge over the multinational might of its chief competitors. 

How investors respond to these strengths and weaknesses will serve as an interesting test case for the near-term prospects of the Hong Kong exchange. The liberalization of the exchange’s rules has opened up access to vast amounts of capital, turning heads everywhere from China’s Ascletis to California’s Grail. But the mix of a lot of money and limited biotech investing experience has raised fears of a bubble.

Details of how much Ascletis wants to raise and at what price are redacted from the filing. But the $36-a-share price of its most recent, $100 million private financing serves as a guide to its ambitions.