ASLAN shares down almost 40% 2 months after Taiwan listing

Singapore

SINGAPORE firms that eschew the Singapore Exchange for "greener pastures" on foreign boards do not always strike gold after listing.

Two months after listing on the Taipei Exchange (TPEx), the shares of Singapore-headquartered biotechnology company ASLAN Pharmaceuticals have tanked, with its market cap shrinking by close to 40 per cent (see amendment note) from the IPO price.

The company's shares were trading at NT$40.50 (S$1.82) on Thursday when TPEx opened, about 40 per cent down from the offer price of NT$68.92. This was despite the public tranche of its shares drawing a 29-times subscription (see amendment note 2).

The firm launched its IPO on the TPEx in May, raising NT$1 billion. It first offered 10,409,000 shares to the public through a competitive auction, with a minimum bid price of NT$64 per share.

A further 2,602,000 shares were then made available for a public draw at an offer price of NT$68.92 - determined based on the weighted average of all successful bids from the auction. Proceeds from the IPO will go towards the development of the firm's existing pipeline of five drugs.

In an email reply to The Business Times, ASLAN chief executive Carl Firth said since the firm set the IPO price earlier in 2017, "the Taiwan biotech market has declined significantly for several macro reasons, including a rotation out of biotech and into tech, the failure of several biotechs to IPO and disappointments in the pipelines of other biotech companies".

"Unfortunately, this affected ASLAN's share price since listing, as it also affected many other Taiwan-listed new drug development companies. Companies that went public around the same time, such as Senhwa, show similar declines in share price," he said. Senhwa was listed at NT$162 and has since also dropped by over 40 per cent.

Mr Firth added that many of these macro trends are expected to reverse later this year and into 2018, with a rotation expected back out of technology, new government measures to support the industry and several key milestones and deliverables from other new drug development companies. He said ASLAN has made "several positive news announcements" and reiterated that its programmes are all on track.

"We are finding, however, that with the current share price, several high quality international funds are attracted to the stock, believing it is undervalued. This gives us an opportunity to strengthen our shareholder base with well-recognised, reputable long-term investors."

In an interview with Apple Daily in June, Mr Firth said he had started buying some of the shares. ASLAN said the decision by Mr Firth and other insiders to buy shares is "a personal decision" and not a company share buyback. The company has yet to announce any share buyback programme.

Mr Firth said ASLAN is focused on building long-term shareholder value and has been delivering on the key milestones for its portfolio.

"Importantly, the IPO was successful and we raised US$33 million, bringing our current cash total to US$70 million. This gives us sufficient runway until late 2019. Day-to-day movements in the share price do not affect the company or the money that we have raised.

"However, we are concerned that the current share price does not reflect the true value of the company, so we are working hard to ensure that our achievements and value created are communicated to investors and we hope that this will then be reflected in our share price."

ASLAN, set up in Singapore seven years ago, develops drugs for cancer types that are more common in Asia - namely biliary tract cancer, breast cancer and gastric cancer.

To date, the company has six projects at various stages. The frontrunner, and the closest to marketing approval, is a drug for biliary tract cancer.

The Singapore Health Sciences Authority recently authorised the initiation of a pivotal study of Varlitinib, ASLAN's lead drug asset, for the treatment of gastric cancer. The firm is looking to commercialise the drug in the next two to three years.

In an earlier interview with BT, Mr Firth said a lack of investor appetite and understanding of biotech led the company to strike Singapore out as an IPO destination, adding that there are currently no biotech firms listed on the Singapore Exchange (SGX).

He said a firm has to be profitable to list in Hong Kong, while listing on Australia's stock market was suitable for raising "a small amount of money, but difficult for larger amounts".

"The market that stood out for us was Taiwan. Taiwan has a rich history of biotech and in particular, many of these companies have IPO-ed."

He said the fall in share price "is predominantly due to market conditions rather than the share lock-up".

"Currently, all of ASLAN's pre-IPO shareholders remain locked up, so the only shares that are trading are the new shares that were issued in the IPO."

Last year, the biotech company chalked up revenue of NT$373 million and a gross profit of NT$369 million. Revenue stemmed mainly from licence agreements with pharma companies. For instance, drug giant Bristol-Myers Squibb reacquired the rights to a drug that ASLAN had licensed in 2011, resulting in revenue of US$10 million.

As with the norm for biotech companies in the development stage, ASLAN recorded a net loss for FY2016. The loss of NT$292.3 million was mainly due to general and administrative expenses totalling NT$224.7 million as well as research and development expenses totalling NT$425.3 million.

Amendment note: An earlier version of this article stated that two months after listing on the Taipei Exchange (TPEx), the shares of Singapore-headquartered biotechnology company ASLAN Pharmaceuticals have tanked, with its market cap shrinking by close to 50 per cent from the IPO price. It should have been "close to 40 per cent from the IPO price".

Amendment note 2: We also said that "This was despite the public tranche of its shares drawing a 25-times subscription". The company had issued 2,602,000 shares for the public draw at the offer price of NT$68.92 and the draw saw 76,377 qualified deals with a lot winning rate of 3.4 per cent. The shares were 29.4 times oversubscribed.