Eddingpharm reverse-merger ‘breakthrough’ for Hong Kong stock exchange

Eddingpharm, an in-licensing company, will gain Genor’s large portfolio of cancer-targeting candidates along with its listing on the Hong Kong Exchange, a longtime goal of the company. Since 2020, Eddingpharm has filed four applications for a Hong Kong IPO and each one has lapsed. 

In 2020, Genor completed a Hong Kong IPO that raised $371 million with a $1.8 billion valuation. At the time, biotechs were hot, and investors were interested. Genor seemed like it was cruising toward becoming a front-row member of China’s innovative pharmaceutical companies. 

Now, Genor’s stock price is $0.25, a 93% decline from the opening price after the IPO. Unfortunately, the company is not alone. Other Chinese biopharmas, such as Alphamab Oncology, Lepu Biopharma, and Ascletis, have also seen their stock prices decline. The money spigot has closed, and companies must scramble for cash. 

Genor is not the only Chinese biotech company in need of a partner. Helen Chen, a Greater China managing partner of L.E.K., put the Genor-Eddingpharm deal into a larger context: “Finally - a breakthrough in Hong Kong Exchanges and Clearing Limited (HKEX) with the first merger involving a Chapter 18A company, Genor! A reverse merger at that with Eddingpharm.” 

As Chen pointed out, the reverse merger, while it might seem like a setback for Genor, could be the end of an unhappy era for China biopharmas, and the start of something new.

“[The merger] is good for the Chinese biopharma industry, as the perception has been that the stringent rules on the [Hong Kong] exchange reduced companies' flexibilities as the growth slowed. This first example illustrates that it is possible to unstuck oneself. Will take-privates be next?” 

Genor’s decline 

The biotech world is fond of the term “the valley of death,” referring to a biopharma’s long stretch between drug discovery and commercialization. The malaise awaits many young biotechs, given the uncertainty of biotech development. Boom times hide the condition; bad times exaggerate it. 

Many Chinese companies have experienced a particularly heavy dose of Death Valley. In the three years since biopharma funding peaked, IPOs have slowed to a crawl and venture capitalists (VCs) are sitting on cash. For listed companies, some investors have sold the shares of companies that did not deliver approved drugs with solid revenues.  

In the Prospectus for the reverse merger deal, Genor admitted that it needed a partner – it did not say a financial partner, though that seemed to be implied – to finish development of its assets and help with commercialization of its advanced candidates.  

Genor has built a portfolio of 17 prospects for cancer, nine of them in clinical trials and the other eight in preclinical development. The company has only one approved drug, GenoMab, an inlicensed biosimilar to rituximab, which aims to treat cancers and autoimmune diseases.

Additionally, the company recently sold global rights (ex-China) for a novel bispecific antibody targeting CD20 and CD3 to a NewCo named TRC 2004. The candidate, designed to cause B-cell depletion, has potential applications in oncology, autoimmune, and immunological diseases.  

Genor did not disclose how much it received for the rights to the candidate, stating only that it was in the “tens of millions of dollars.” However, the agreement is heavily backloaded with up to $443 million in milestones.

Genor’s most advanced candidate is lerociclib, a differentiated oral CDK4/6 inhibitor. It is intended for HR-positive, HER2-negative patients with advanced breast cancer. Earlier this year, Genor filed two NDAs for the candidate with Chinese officials, one with letrozole and one without. Both were accepted for review. Therefore, the company could receive approvals in less than a year.  

Eddingpharm is set to remake Genor, though it is not clear how. Will it sell off the preclinical assets? Can it find capital to develop the clinical stage assets? The possibilities are endless. But whatever happens to the two companies, the reverse merger has a significance beyond itself, it shows other “stuck” biopharmas that they still have options.