LianBio (NASDAQ:LIAN) was a rising star of the Chinese language pharmaceutical scene however the medicine startup has flamed out simply 4 years after its launch.
The biotech’s abbreviated lifespan underscores the challenges and prices of bringing novel medicine to the market, even with monetary backing and massive ambitions.
The corporate’s mission was to acquire the rights to medicine within the latter levels of improvement and make them accessible to the mass Chinese language market. LianBio was the poster little one of this so-called “licensing in” mannequin, acquiring financing of $310 million simply two months after the corporate was arrange in 2020.
A 12 months later it went public on the Nasdaq, elevating one other $325 million. However after a strategic evaluation of its enterprise, LianBio introduced final Tuesday that it might wind down most of its operations and delist from Nasdaq by the tip of this 12 months. It then plans to wrap up its remaining enterprise over the subsequent three years.
In its announcement, LianBio mentioned it might promote its remaining pipelines, section out ongoing scientific trials and pay a particular dividend of $4.80 per share totaling about $528 million on or round March 11. Income can be distributed to shareholders as soon as the sale of the remaining belongings is accomplished.
The corporate plans to put off greater than 50 staff, or about 50% of its workforce, within the first quarter however mentioned it might retain a core workers for now to make sure an orderly winddown and to assist maximize the worth of the remaining belongings. The enterprise would lastly be dissolved within the first half of 2027.
The corporate plans to submit a delisting software to the U.S. Securities and Trade Fee on or round March 8, with a view to quitting the Nasdaq round March 18. Nevertheless, some traders nonetheless noticed a revenue alternative within the firm’s exit technique. On the day of the announcement, LianBio’s shares soared 18.8% to shut at $4.80, the extent of the proposed particular dividend.
Nevertheless, traders who purchased in to the unique IPO can be left with a 70% loss. LianBio listed in November 2021 at a proposal value of $16. The inventory fell 14.4% on the debut day and has been on a downward spiral since then. It hovered round $3 for a protracted interval after Might 2022, hitting a $1.33 low in October final 12 months with a market capitalization of simply $140 million.
In its most up-to-date earnings report, LianBio posted a web lack of $69.7 million for the primary three quarters of 2023, in contrast with a $92 million shortfall for a similar interval a 12 months earlier, and the corporate nonetheless held money reserves of $252 million. The mixture of low market capitalization and good money circulation attracted the eye of “vulture capitalist” TANG-Capital in early December final 12 months. The hedge fund made a buyout provide for 80% of the online proceeds from the corporate’s tasks at $4.30 per share, however required LianBio to ensure at least $515 million in money and money equivalents remaining on its books on the time of supply. In the end, the LianBio board rejected the provide as undervaluing the corporate.
Gradual market progress
The $4.80 per share particular dividend promised by LianBio exceeds the quantity supplied by TANG-Capital for the drug firm, which was based and led by U.S. non-public fairness fund Perceptive Advisors. The life sciences investor arrange LianBio within the hope of introducing high-quality and clinically confirmed medicines from abroad into China to fulfill the wants of the world’s second-largest pharmaceutical market.
And LianBio received off to a promising begin, licensing in 9 merchandise from different drug builders earlier than itemizing its shares in 2021. The medicine focused circumstances together with cardiovascular and renal issues, cancers, eye issues, irritation, and respiratory sicknesses. Many of the acquired pipelines have been already within the late scientific levels, leaving the corporate to conclude the trials and commercially launch the merchandise on the Chinese language mainland. Friends reminiscent of Everest Medicines (1952.HK) and Zai Lab (ZLAB; 9688.HK) adopted an identical mannequin.
However 4 years after it was based, LianBio had nonetheless not managed to cross the industrial threshold with any product, which may mirror an absence of inhouse R&D functionality. Of the 9 pipelines, Mavacamten made the quickest progress as a drug for coronary heart illness. It had already accomplished Section II scientific trials earlier than being acquired from MyoKardia in 2020 and was authorized for advertising within the U.S. in April 2022. However regardless of its world progress, the drug didn’t full Section III scientific trials in China till August final 12 months.
After the drug gained advertising approval, LianBio confronted the prospect of investing massive sums to construct a commercialization crew. As a substitute, the corporate licensed the rights in China to Bristol Myers Squibb (BMY) in October final 12 months for $350 million. Minus a $40 million fee for acquiring the drug, LianBio earned a web $310 million from the deal. LianBio acquired one other drug candidate for the respiratory virus RSV in 2021 with a $14 million down fee. That drug, Sisunatovi, was bought on to Pfizer (PFE) in 2022 for an preliminary $20 million and $135 million in milestone funds.
The offers present LianBio was adept at deciding on promising medicine and appearing as an business intermediary, however in addition they spotlight its shortcomings as a medicine producer. Amongst corporations with an identical enterprise mannequin, Everest Medicines, incubated by biopharmaceutical funding fund C-Bridge Capital, already has a number of star merchandise in the marketplace, together with Xerava, a potent antimicrobial drug, and Nefecon, the world’s first focused drug for the kidney illness IgA nephropathy.
Due to this fact, traders can draw an vital lesson from LianBio’s quick lifecycle: the licensing-in mannequin is completely viable if corporations are capable of spot good drug candidates and comply with up with R&D and advertising experience.
Disclosure: None.
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