Athenex Details Pipeline Plans, $100M Investment

• Collaboration with Xiangxue Pharmaceutical Expands Portfolio in to TCR-T Immunotherapy
• In-Licensing of a Biologic Product from Avalon BioMedical Management

Athenex, Inc. (ATNX), a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer and related conditions, today announced that it has entered into the following agreements:

• Establishment of a joint venture with Xiangxue Life Sciences, a wholly-owned subsidiary of Guangzhou Xiangxue Pharmaceutical Co., Ltd. (Xiangxue Pharmaceutical), for the research, development and commercialization of T-cell receptor-engineered T cells (TCR-T), a cancer immunotherapy technology, based on the novel approach on high-affinity TCR developed by Xiangxue Life Sciences;
• In-licensing of worldwide rights to a pegylated genetically modified human arginase from Avalon PolyTom (HK) Limited (PolyTom), a subsidiary of Avalon Biomedical Management Limited; and
• A strategic investment of US$100 million from Perceptive Advisors, an institution dedicated to supporting the most promising technologies in healthcare.

Xiangxue Life Sciences is a wholly-owned subsidiary of Xiangxue Pharmaceutical, a long term partner of Athenex for the development of KX-02 for glioblastoma multiforme in China. Xiangxue Life Sciences is a Chinese biopharmaceutical company focused on TCR-based therapies for cancer and has developed a new generation TCR-T, named HATac, which consists of the expression of high binding affinity soluble T-cell receptors on the engineered T-cells to target HLA-antigenic peptide complex on certain types of cancer cells. Early clinical studies in China demonstrated a good safety profile in patients.

Axis Therapeutics Limited, a new joint venture to be established and owned initially as 55% by Athenex and 45% by Xiangxue Life Sciences, has in-licensed the worldwide (excluding mainland China) rights of all the intellectual properties and know-how of the TCR-T immunotherapy technology from Xiangxue Life Sciences, subject to certain closing conditions and approvals.  Pursuant to the terms of the license agreement and shareholders agreement, Athenex will issue US$5 million worth of Athenex common stock to Xiangxue Life Sciences as an upfront payment and Athenex will contribute US$30 million in cash to the joint venture. Axis Therapeutics will also pay various clinical and regulatory milestones of up to US$110 million to Xiangxue Life Sciences. Xiangxue Life Sciences will retain the mainland China rights to the technology and there will be royalties on net income payable to Axis Therapeutics upon successful commercialization in mainland China. Additional new TCR-T technologies developed by Axis will also be partnered with Xiangxue Pharmaceutical in the future for the mainland China rights.

Athenex has strategically in-licensed a pegylated genetically modified human arginase, or Pegtomarginase, which was initially developed by the Hong Kong Polytechnic University and subsequently licensed to PolyTom. Through extensive research, a single isomer of pegylated genetically modified human arginase with a favorable pharmacokinetic and potency profile was identified and preclinical work demonstrated that the molecule represents a promising clinical candidate. The anti-cancer mechanism of this biologic product lies in that some cancers do not express either ornithine transcarbamylase (OTC) and/or argininosuccinate synthetase (ASS), two enzymes critical for the synthesis of arginine in the urea cycle pathway. As cancer cells will not be able to synthesize arginine, they will have to depend on external supply of arginine for tumor survival and growth. This treatment approach shows specificity as the depletion of circulating arginine will starve such OTC-/ASS- deficient cancer cells, while normal cells can synthesize arginine intracellularly through urea cycle for their survival.

Perceptive Advisors, an investment manager with a deep history in supporting biotechnology companies, will provide a combination of equity and debt financing to support Athenex’s operations and continued development, including pipeline expansion initiatives. Perceptive Advisors will invest US$100 million in Athenex, comprised of US$50 million in equity and US$50 million in debt.

Dr. Johnson Lau, Chairman and CEO of Athenex, commented, “Given our confidence in our two Phase III programs in Oraxol for metastatic breast cancer and KX-01 ointment for actinic keratosis, we are delighted to have this opportunity to further expand our product pipeline. The additions of TCR-T based cancer immunotherapy in collaboration with our long term business partner, Xiangxue Pharmaceutical and its subsidiary Xiangxue Life Sciences, and of an anti-cancer biologic will further complement and enhance our Oncology Innovation Platform. We are particularly excited about the potential synergies that can be created between the new therapies and our existing pipeline. We have developed a business strategy to fully explore the potential of all these platforms. We are also grateful to have Perceptive Advisors as our financial partner.”

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