iX Biopharma, a Singapore-listed specialty pharmaceutical company with expertise in drug delivery systems, has worked consistently on developing a wide range of medications, closing deals and partnerships, and improving investments in medical technology to capture a share of the multibillion-dollar global drug market.
On Nov 24 last year, the company announced an outlicensing agreement for its Wafermine drug worth more than $300 million (excluding royalties) with Nasdaq listed Seelos Therapeutics. Under the agreement, Seelos will provide the regulatory, clinical development and US market knowledge to register and commercialise Wafermine and other products related to ketamine — a medicine used to relieve pain.
Dr Janakan Krishnarajah, iX Biopharma’s COO cum chief medical officer, explains why Seelos was chosen. “Seelos has a portfolio of ketamine drugs, which means that they know the drug well, and know how to develop it and export it,” says Krishnarajah in an interview with The Edge Singapore. “They also had a strategy to build up ketamine as a franchise, which was important.”
“[Seelos] also demonstrated they could deal with the FDA (US Food and Drug Administration) and shorten clinical development programmes,” he adds. “This means that the drug could get approved faster, if clinical studies meet their end-points.”
Typically, it is a costly and vigorous regulatory process before drugs can be sold in the US. However, FDA approvals are often taken as a reference by authorities in other countries in giving approval for sale in other markets.
“Fundamentally, the base of the United States [with this deal] sets an advantage for local knowledge and access to potential distributors,” Krishnarajah says. “The management team has also demonstrated they are very experienced and capable at capital markets, having raised US$157 million ($212 million) in the last 12 months.”
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Seelos will fund all development, regulatory and commercialisation costs, and is expected to develop the products for pain and depression indications. This stands to lift a significant financial burden of these activities off iX Biopharma, which is still loss-making because of spending needed for research and development, sales and marketing, as well as general administration costs.
Prior to the agreement, iX Biopharma had already completed Phase 2 clinical studies on Wafermine in the US. According to the company officials, a typical Phase 3 development for a pain programme should cost US$30 million to US$40 million and take 18 months to complete, while a typical depression programme is expected to cost US$50 million or more.
For the most recent FY2021 ended June 30, 2021, the company reported revenue of $1.7 million, an increase of 77% over FY2020, led by higher sales of its nutraceutical products and WaferiX-based product development services from pharmaceutical companies in China. In the same period, it reported red ink of $8.2 million, a reduction of 22% from $10.5 million incurred in FY2020. For the six months ended June 2021, the company’s net loss was $5.42 million, up 15% y-o-y.
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As part of the deal with Seelos, iX Biopharma will receive an upfront payment of US$9 million in cash and shares in FY2022. In addition, iX Biopharma will receive “doubledigit” percentage royalties on future net sales of any products which incorporate certain compounds of ketamine using its WaferiX technology.
“Given the large addressable market of pain and depression, royalties are expected to be multiple times of the milestone payments,” says chief commercial officer Eva Tan at the same interview, when asked to quantify estimates for the royalties.
‘Self-rejuvenating’ business model
The larger drug companies, dubbed the Big Pharmas, can maintain multiple product development programmes concurrently and manufacture their own drugs. The drugs approved for sale can help fund the development costs of others in the pipeline.
For smaller companies like iX Biopharma with fewer resources, they have to be more agile in their business. According to Tan and Krishnarajah, with the Seelos deal, funding and resources can be freed up and diverted to iX Biopharma’s other existing drug candidates, such as medicinal cannabis for anxiety and dexmedetomidine for acute agitation.
“A deal [like this] of this size will be a catalyst for more outlicensing opportunities [in the future],” Tan reasons. “We’ve come full circle for Wafermine, and now we launch into another cycle of another new product. So it’s a self-rejuvenating business model.”
Tan reiterates that after this deal, iX Biopharma retains ownership of the WaferiX technology, as the partnership with Seelos focuses on developing ketamine products.
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China potential
While the Seelos deal is a worldwide one, it excludes mainland China, Hong Kong, Macau and Taiwan. That does not mean iX Biopharma is not paying as much attention to these markets. On the contrary, Tan describes China as a market that the company “cannot afford not to look at”.
On Sept 30 last year, iX Biopharma announced a 10-year agreement with China Resources Pharmaceutical Commercial Group — part of the Hong Kong-listed China Resources Pharmaceutical Group — for the licensing, supply and distribution of Wafesil, which is used for the treatment of male erectile dysfunction, in China. Both parties had in April 2021 announced a strategic cooperation framework agreement for “all-round” cooperation.
“We have received a lot of interest from Chinese partners that want to utilise the WaferiX sublingual, drug delivery technology to develop products across many different therapeutic areas that they can then market in China,” Tan adds, although she does not comment on the specific therapeutic areas that Chinese partners were looking at.
In a stock market filing on July 12 last year, iX Biopharam said it is exploring the listing of its pharmaceutical business (including medicinal cannabis) in Hong Kong. This possible listing would give the company “greater access to funding and support” from investors, including funds with experience investing in pharmaceutical and biotech companies and therefore understand the industry well.
“Through the proposed spin-off and listing, we have a unique opportunity to extract and deliver greater value from our group’s businesses to our shareholders,” the company states, in a reply to shareholders ahead of its annual general meeting.
The company has been tapping other venues for funds. On June 8, the company announced a rights issue to raise up to $9.56 million in net proceeds, with around 80% of the money raised allocated for marketing and manufacturing activities, and the remaining $2 million for general working purposes.
For every 100 shares held, shareholders could subscribe for seven new rights shares. The rights shares are priced at 20 cents each, at a discount of 18.4% to the last traded price of 24.5 cents before this fund-raising exercise was announced.
A group of existing shareholders have given their undertaking to take up their full entitlement. They include chairman and CEO Eddy Lee, who founded the company in 2008. Lee, who was previously senior vice president of Resorts World (Genting Group) in Malaysia, is also iX Biopharma’s largest shareholder with an interest of more than 26%.
On July 26 last year, the company issued 48.8 million new shares from the rights issue, bringing its total share base from 697.4 million to 746.2 million. Back in September 2020, the company had another round of fund-raising. It placed out 44.5 million new shares to various subscribers at 23 cents per share, raising net proceeds of $10.2 million.
Throughout the whole of 2021, the company also made a series of updates on its businesses, such as various deals to sell its products to markets such as New Zealand and Brazil. It also announced the expansion of its production capacity in Australia, culminating in the licensing deal with Seelos.
However, its share price has yet to react very significantly. At the start of 2021, its share price was at 24 cents. It closed at 19.7 cents on Jan 12, 2022, valuing the company at $154 million.
According to Phillip Securities’ head of research Paul Chew, the Seelos deal is a significant breakthrough for the company to monetise its Wafermine drug with a recurring revenue stream. “[It] also frees up resources to develop other exciting products in its pipeline which can then be monetised in the same manner,” writes Chew in his Dec 1 note. He is keeping his “buy” call on iX Biopharma but with a higher target price of 35.5 cents, increased from 33.5 cents previously.
Krishnarajah believes that it is possible that since this type of licensing deal is new to the market, it likely has not completely comprehended the scope of this deal. “The $9 million upfront payment is really the tip of the iceberg when it comes to the transactional value of this deal, especially with the significant development milestones that accompany the deal.”
Tan and Krishnarajah are hopeful that the deal with Seelos will help create the “momentum” for further growth — including in other key markets. “As a company that is transitioning from research and development to commercialisation, we now can say that we have commercialised the Wafermine product, and are now in the process of commercialising Wafesil for the Australian market,” says Krishnarajah.
Photo: Albert Chua/The Edge Singapore
