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Biotech company Athenex to seek $100 million in initial public offering

The Buffalo biotech company Athenex is seeking to raise $100 million in an initial public offering on the NASDAQ stock exchange to help pay for its work to develop potential cancer drugs.

The company reported in an S-1 filing with the Securities and Exchange Commission that it needs additional financing to fund future operations, including completing the development and commercialization of its potential cancer drugs. It also needs more funding to conduct additional clinical trials for the approval of the drugs by the Food and Drug Administration.

Some Athenex drugs – including its Orascovery platform – deliver chemotherapy orally, a departure from intravenously injecting drugs, while its Src kinase inhibition research shows promise as another biochemical mechanism to fight cancer. To move forward, the company said it must successfully develop oral formulations and ensure they can be delivered safely and consistently in capsule form .

The ability to orally deliver chemotherapy, such as paclitaxel, could offer significant benefits to patient outcomes by allowing them to stay on therapy longer and combine it with other treatments, the company noted in the filing.

"We believe that making paclitaxel or other cytotoxic drugs more tolerable will increase the dosage patients can take over time and, thereby, increase the efficacy of the drug," company officials said in the filing.

The company has two drug candidates in Phase 3 trials, meaning the treatments have worked well in previous smaller studies.

Athenex's work extends beyond potential cancer treatments. It has also diversified into drug testing and manufacturing under contract to other companies.

"That's something that people are missing about Athenex. It is a multi-platform business, and that has provided stability. Athenex is not just about the drugs it is developing," said Charles Lannon, one of 99 investors that backed Athenex at its start, when it was known as Kinex Pharmaceuticals. The investors, identified in the S-1 filing as Pharminex LLC, own about 6 percent of the company’s shares.

Lannon said the IPO marks an important turning point for Athenex and for Western New York, which is trying to expand its biotech industry and would benefit if Athenex is successful as a public company. He credited Athenex chairman and chief executive officer Johnson Lau and Flint D. Besecker, Athenex's former chief operating officer, with developing a promising business strategy focused currently on the United States and China.

Athenex in May raised $20 million from investors through a debt offering, according to a filing with federal securities regulators. In addition, in April, New York State released $200 million in promised funding for the company's plans to build a 315,000-square-foot, drug manufacturing facility in Dunkirk. In return, Athenex promised over time to spend $1.52 billion and hire 450 workers there.

Athenex, formed in 2003, traces its roots to research into promising anti-cancer drugs conducted by retired University at Buffalo chemistry professor David G. Hangauer, the company’s former chief scientific officer and a founder of Athenex.

The company grew over the past five years, acquiring or making licensing agreements with several small pharmaceutical companies to give it access to market-ready drug ingredients and drug candidates. By the end of 2016, Athenex had 391 employees and consultants in Buffalo, New Jersey, Texas, Hong Kong, Taiwan and China, and had raised about $500 million in capital.

Athenex has a North American headquarters, product development center and pilot plant on the Buffalo Niagara Medical Campus, where the state invested $25 million in construction and equipment costs.

The company in 2014 began looking for a location for a plant where it would manufacture advanced cancer drugs and pharmaceutical products to ship around the world. The state urged Athenex to pick a site outside metro Buffalo and Erie County, to bring the economic-development benefits of the project to an outlying area of Western New York.

The IPO – which is being handled by investment banks Credit Suisse, J.P. Morgan and Deutsche Bank – represents a major move forward for Athenex. But it's not without risks.

The company reported that it has not yet generated substantial revenue from product sales and anticipates significantly more development expenses. It incurred losses in 2015 of $50.7 million and in 2016 of $87.9 million, and had an accumulated deficit of $195.1 million at the end of 2016.

No date for the IPO has been set or a share price. Teresa Brophy Bair, Athenex's vice president for corporate development and legal affairs, said the company is declining to comment on the initial public offering beyond what is in the filing.

It would be listed on the NASDAQ stock exchange under the symbol ATNX.

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