iX Biopharma has high hopes for drug spin-off

CATALIST-LISTED iX Biopharma wishes investors would focus less on its current topline or bottom-line, and more on the potential of its products and patented technology.

This search for understanding investors is one reason it is looking to spin off its pharmaceutical and medicinal cannabis business for a listing in Hong Kong, said director of corporate affairs Yee Chia Hsing.

"The type of conversation that they have (in Hong Kong) is very different. They don't ask you about when you turn profitable ... They talk about your drug pipeline, they try to understand the size of the market."

In iX Biopharma's case, he added, the potential market is huge. Its lead product, Wafermine, provides ketamine in the form of easily-dissolved wafers, for use in pain management.

It could provide an answer to the "opioid crisis" surrounding addictive painkillers in the United States, said Mr Yee: "I think it's the right drug at the right time." The medical use of ketamine is not addictive in the way that opioids can be, he added.

Wafermine has received European Medical Agency endorsement for its Phase 3 plans, and has cleared Phase 2 in the US. This means it has reached a consensus with regulators on the remaining clinical development needed for Wafermine to be approved.

This facilitates the firm's discussions to out-licence the drug: specifically, finding a partner to support Phase 3 development and the obtaining of marketing approval. Deal terms vary, but Mr Yee said out-licensing deals often mean that "you're profitable immediately" with the first milestone payment.

Then there is the potential of iX Biopharma's patented sublingual - that is, under the tongue - drug delivery wafer technology, WaferiX.

Its wafers are an alternative to traditional drug delivery via an intravenous drip, which needs a hospital setting; or pills, which can be rendered ineffective or less effective by stomach acid. With iX Biopharma's wafers, the drug is absorbed via capillaries under the tongue. This method of delivery is faster and more effective.

The company considers WaferiX a versatile "platform technology" that it can use to repurpose known, approved, off-patent drugs for this delivery method. This cuts years of development time and "de-risks the safety aspect", said Mr Yee: "It's a drug that's been around and been approved."

Another key product for iX Biopharma is Xativa, its sublingual medicinal cannabis wafers. Xativa does not contain the psychoactive THC compound, Mr Yee hastened to add. Xativa also has great market potential - though perhaps not at home in Singapore, he wryly acknowledged.

As an alternative to existing medicinal cannabis delivery methods such as oils or smoking, Xativa allows for rapid absorption, fixed dosages and a more predictable outcome.

In June, Xativa received export listing status in Australia, putting it on the list of drugs approved for export. It is now being supplied to Brazil and New Zealand, with potential future markets including Europe and individual states in the US - though the latter may face regulatory hurdles.

Indeed, the stringent legal and regulatory requirements in pharmaceutical development were among the reasons cited for the planned spin-off when it was announced in July.

Currently, iX Biopharma deals in both pharmaceuticals and nutraceuticals. The latter are pharmaceutical alternatives with claimed benefits, but are not regulated as strictly.

Having both products under one roof has put "divergent demand" on management, iX Biopharma said in a statement last month to announce the spin-off.

The plan is therefore for iX Biopharma's pharmaceutical and medical cannabis business to be held by subsidiary Ligo Pharma, with a separate management and operations team.

If and after the spin-off is complete, iX Biopharma will focus on its nutraceuticals business - which has lower product development risks and costs, and a generally shorter time-to-market.

Besides this practical difference, listing on the Hong Kong stock exchange's mainboard will give the spin-off independent access to capital markets.

"Actually, when we cleared Phase 2 (for Wafermine), we thought we would get a price re-rating," Mr Yee said, noting that pharmaceutical stocks on Nasdaq, for instance, tend to get such boosts at that milestone.

But institutional investors here do not generally look at Catalist-listed companies, while retail investors "are very used to talking about dividend yield".

"I don't blame them," he added. Hong Kong's new listing chapter 18A, however, caters for biotech stocks and has attracted biotech-focused funds to set up, all of which makes for a more promising environment - and investors who look beyond questions of profitability timelines.

While full-year results have yet to be released, Mr Yee candidly noted that the company remains unprofitable. For the first half-year ended Dec 31, iX Biopharma's revenue nearly trebled to S$830,000 from S$294,00 in the year-ago period. Its gross loss narrowed from S$395,000 to S$157,000, while the loss for the period narrowed from S$5.8 million to S$2.8 million.

While the Catalist listing has allowed iX Biopharma to raise some funds over the years, Mr Yee said the company has "big ambitions".

"To do more, we really need to diversify our sources of fundraising," he added.

In addition, funds raised on SGX currently tend to go towards the pharmaceutical business. If this is spun off, then "it frees up the resources for us to really spend money on the supplements brand", said Mr Yee, who is also general manager for the nutraceuticals unit Entity Health.

Entity Health uses WaferiX technology for several of its products too, making them more effective than competitor supplement pills. Its range also includes products that do not need wafer delivery, such as herb-based ones.

Entity Health's products are available in some 250 physical stores in Australia, and online in Singapore. But its main market is China, which it entered last year via e-commerce stores on JD.com and Tmall Global. China already accounts for more than half of its sales.

Australia is known for its very strict regulations for nutraceutical products and this has given a boost to Entity Health's reputation in China, said Mr Yee.

The unit's focus on anti-ageing and skincare is also aligned with Chinese consumers' interests. Yet the China market is both huge and hugely competitive, requiring significant resources for marketing. Even if the spin-off goes through, iX Biopharma will have plenty to occupy itself with.

"The type of conversation that they have (in Hong Kong) is very different. They don't ask you about when you turn profitable ... They talk about your drug pipeline, they try to understand the size of the market."

Yee Chia Hsing, iX Biopharma

director of corporate affairs