China's Zai Lab jumps 55% on debut after $150m IPO

The company sold 8.33 million American Depository Shares (ADS) at $18.00 apiece, while underwriters have the option to purchase a further 1.25 million shares by exercising the overallotment option, according to a statement. The offering was upsized from 6.76 million shares, including the overallotment option, while $18.00 represents the top end of the target pricing range.

Zai Lab’s stock opened at $24.39 on September 20 and peaked at $19.84 before closing at $27.93.

None of the company’s VC backers sold any shares in the offering, although their stakes were diluted as a result of the new share issue. Based on an earlier assumption that Zai Lab would sell 8 million shares in total, Qiming Venture Partners would hold a 20.2% interest post-offering, with Sequoia Capital China and Kleiner Perkins Caufield & Byers (KPCB) owning 7.7% and 7.5%, respectively.

Zai Lab was set up in 2013 by Samantha Du, who began her career in the early 1990s as a member of Pfizer's R&D department. She subsequently co-founded Hutchison China MediTech and led its R&D subsidiary Hutchison MediPharma, building up a pipeline of oncology and auto-immune treatments. After China MediTech listed in 2006, Du spent two years as head of China healthcare at Sequoia Capital.

Zai Lab’s strategy is to license pre-clinical findings from Western countries and then develop drugs in China, leveraging the comparatively low operating costs. In 2014, it obtained a license from Sanofi for two novel compounds with a view to using them to treat chronic respiratory diseases. Since then the company has entered into similar agreements with Bristol-Myers Squibb, UCB, Hanmi Pharm, Tesaro, GlaxoSmithKline, and Paratek Pharmaceuticals.

The pipeline currently comprises six drug candidates, three with Greater China rights and three with global rights. The leading candidate is Niraparib, which has been approved for phase three trials in China for the treatment of ovarian and breast cancer.

In total, the company has raised $164.5 million in equity financing from investors including global and China-based healthcare funds. Qiming led Zai Lab’s Series A round in 2014, committing half of the $30 million round. KPCB, Sequoia, TF Capital, and domestic player CRO TigerMed were the other backers.

A Series B round worth $100 million followed in January of last year. It was led by Advantech Capital with participation from Qiming, Sequoia, TF, and OrbiMed. In June of this year, OrbiMed led a $30 million Series C round for the company.

The company has yet to post revenue. Its net loss widened to $37.5 million in 2016 from $18 million the previous year as a result of rising research and development expenses. Part of the proceeds of the IPO will be used to complete phase three trials for Niraparib and to support commercialization efforts in Greater China.

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• Topics
• Greater China
• IPO
• Healthcare
• China
• Qiming Venture Partners
• Sequoia Capital
• Kleiner Perkins Caulfield & Byers