On the evening of March 25th, ADC (Antibody Drug Couplers) leader Kelenbotai Biotechnology (06990. HK) released financial data for 2023, which showed that the company's annual revenue was 1.54 billion yuan, a year-on-year increase of 91.6%; The annual loss reached 574 million yuan, a year-on-year decrease of 6.8%; The adjusted annual loss was 451 million yuan, a year-on-year decrease of 24.4%.
In addition, the cash flow from operating activities of Kelenbotai has changed from negative to positive. As of December 31, 2023, the company's cash and financial assets were approximately 2.53 billion yuan, compared to 119 million yuan in the same period last year.
The reason for the significant increase in revenue, explained by Kolenbotai, is mainly due to revenue from licensing and cooperation agreements with Merck to develop up to seven preclinical ADC assets for cancer treatment.
MSD made over 1.4 billion yuan in payments last year
In 2022, Kelenbotai and MSD reached three consecutive collaborations on ADC drugs, with a total transaction amount of 11.8 billion US dollars, setting a new record for China's innovative drug external authorization transaction amount. Specifically, Kolenbotai has granted Merck a global exclusive license or exclusive license option to 9 ADC assets in its innovation pipeline, including 3 ADC assets that have already advanced to the clinical stage (core product SKB264 and main products SKB315 and SKB410) and 6 preclinical ADC assets.
However, in October 2023, after partnering with First Third Party, MSD chose to terminate its partnership with two preclinical ADC assets of Kolenbotai. At that time, Kelenbotai emphasized in the announcement that the two ADC assets that terminated the cooperation were not our core or main products. "The cooperation with Merck's other 7 ADC assets has not been affected, and Merck has confirmed with our company that they are still committed to cooperating with Karen," said Karen Botai.
When asked about the positioning of cooperation with Kelenbotai and First Third Party, the management of MSD also emphasized that they will adhere to the principle of "a bowl of water is flat" and pointed out that Kelenbotai and First Third Party are important partners, and the company will continue to explore and deepen cooperation.
According to the 2023 annual report, during the reporting period, MSD made multiple payments to Kelenbotai, with a total amount of approximately 1.421 billion yuan. This includes a non refundable advance payment of 175 million US dollars (approximately RMB 1.206 billion) to the company in March 2023; In October of the same year, when achieving several milestones, MSD made a total payment of $30 million (approximately RMB 215 million), which involved the development, use, manufacturing, and commercialization of SKB264 (MK-2870), as well as reimbursement of routine research and development expenses for company licensing and collaborative projects.
In addition, the annual report also revealed that in 2023, MSD launched three key global phase III clinical trials on SKB264 (MK-2870), of which the clinical trials for non small cell cancer (NSCLC) and breast cancer (EC) have reached relevant clinical milestones, triggering a total of 75 million US dollars (about 533 million yuan) of payment on behalf of MSD, and the company has received payment from MSD in the first quarter of 2024.
Expected to launch core products in the second half of this year
Kolenbotai is known as a pioneer in the field of ADC, but the company itself has not been established for a long time. According to its prospectus, Kelun Botai was jointly established by Kelun Pharmaceutical (002422. SZ) and four employee incentive platforms (Kelun Huicai, Kelun Huineng, Kelun Huizhi, and Kelun Huide). As a holding subsidiary of Kelun Pharmaceutical, the former positions Kelun Botai as an independent platform for innovative drugs.
From 2019 to 2021, Kelun Pharmaceutical transferred the related assets of its innovative drug research and development projects to Kelun Botai twice. In March 2019, Kelun Research Institute, a wholly-owned subsidiary of Kelun Pharmaceutical, transferred its previously owned patents and proprietary technologies related to innovative drug research and development to Kelun Botai for 405 million yuan. In October 2021, Kelun Research Institute transferred A166 related patents, proprietary technologies, etc. to Kelun Botai for a price of 14.4 million yuan.
According to the prospectus, after the completion of the transfer under the asset transfer agreement of Koren Research Institute, the remaining Koren Group will mainly focus on the production of intravenous injection products and antibiotic intermediates, as well as the research and development of generic drugs, mainly through Koren Research Institute. On the other hand, Kelenbotai mainly focuses on innovative drug research and development, production, and commercialization.
At present, Kelenbotai has three core technology platforms for ADC, macromolecules, and small molecules, but no products have been launched for sale. The company's core products are SKB264 and A166 ADC drugs. It is reported that SKB264 is an innovative TROP2 ADC in the NDA (New Drug Market Application) stage, used to treat various advanced solid tumors. A166 is a differentiated NDA stage HER2 ADC designed for the treatment of advanced HER2+solid tumors, targeting advanced monotherapy. It is worth mentioning that HER2 and TROP2 are both popular targets in ADC drug development.
In terms of product commercialization and pipeline promotion, Kelenbotai stated in its annual report that the company plans to accelerate the clinical development of drug pipelines in the clinical stage, striving to apply for regulatory approval and initiate product launch as soon as possible. It is expected to submit IND applications for multiple pipelines in 2024, most of which are aimed at ADC and its derivative assets. After regulatory communication and obtaining approval for listing, the company expects to launch core products SKB264, A166, and A140 in the Chinese market in the second half of 2024 or the first half of 2025.
No products have yet been launched for sale, and multiple research and development efforts are still underway. This is also one of the reasons why Kelenbotai's losses have narrowed compared to its revenue growth. According to financial report data, in 2023, the company's sales cost reached 781 million yuan, a year-on-year increase of 182.15%; Research and development expenses reached 1.031 billion yuan, a year-on-year increase of 21.86%. According to Kolenbotai, the company's sales costs mainly include experimental and testing expenses, project cooperation expenses, salaries and benefits for R&D personnel, etc. Among them, the expenses for experimentation and testing were 470 million yuan, a year-on-year increase of 197.55%;
At present, Kelenbotai has formed a commercial team and will continue to expand the team size. The annual report shows that Kolenbotai is actively recruiting talents with a strong background in oncology. "We have formed a mature commercialization team and plan to expand to about 500 people by the end of 2024. The commercialization team will supervise and coordinate pre market preparation and commercialization, laying the foundation for rapid commercial scale distribution of our products after they are expected to receive NDA approval from the National Medical Products Administration.".