HighLight-backed Zentalis raises $165m in US IPO

The company sold 9.18 million American Depository Shares (ADS) for $18 apiece, the top end of the indicative range, according to a statement. It had already increased the size of the offering from 7.65 million shares. Underwriters have the option of purchasing up to 1.38 million additional shares. The stock opened at $25.22 on April 3 but closed at $23.20. It ended April 6 at $24.39, up 5.1%

Prior to the IPO, Zentalis received $162.1 million in private funding from the likes of HighLight, Farallon Capital, Matrix Capital Management, Mayo Clinic, and Viking Global Investors. Matrix and Viking are the largest external investors listed in the prospectus with 11.6% and 11.3%, respectively. HighLight – which owns less than 5% – invested because it wanted to use data from the company's clinical trials in the US to launch trials in China.

Established in 2014, Zentalis develops small molecule therapeutics targeting fundamental biological pathways of cancers. The company has three treatments in phase one clinical trials and another that is one stage short of that milestone, having achieved investigational new drug (IND) status. The three most advanced drugs target breast cancer, solid tumors, and lung cancer. The first is being developed in collaboration with Pfizer and the third with China-based SciClone Pharmaceuticals.

Zentalis has yet to generate any revenue because its drugs haven't reached the point of commercialization. The company's net loss increased from $23.4 million in 2018 to $46.4 million in 2019, largely due to rising research and development costs.

HighLight has $1.4 billion in assets under management, across US dollar and renminbi-denominated funds. While most of its portfolio companies are in China, the GP will consider US investments where there is a China expansion angle. This was the case with biotech developer Bonti, which HighLight backed in 2017 through an extended Series B round. An exit route emerged 18 months later as Allergan agreed to buy the business for $195 million, excluding add-ons.

Earlier this year, HighLight reached a first close of $300 million on its third US dollar fund, which has an overall target of $400-450 million. However, the private equity firm admitted that further progress would likely be stymied by the coronavirus outbreak.

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• Topics
• Greater China
• North America
• Healthcare
• IPO
• China
• USA
• Pharmaceuticals
• HighLight Capital