New Horizon Health Ltd. raises HK$2.04 billion ($263 million) on the Stock Exchange of Hong Kong Thursday under stock code “6606” to advance the commercialization of its cancer screening products.
The deal is sponsored by Goldman Sachs and UBS; bookrunners are Haitong International, BOC International, Daiwa Securities, and VMS Securities.
A greenshoe option to buy 11.5 million additional shares may boost the offering size to about $300 million.
During the IPO subscription period, New Horizon said its offering was oversubscribed 4,133 times; over 1.07 million retail investors have subscribed to its shares. It has priced its public float at HK$26.66 per share, the high end of the expected range, and opened at HK$76 per share on Thursday in Hong Kong.
Founded in 2014, New Horizon has four products in either sales or late-stage development, each one unique in China. And one, ColoClear, is the only colon cancer screening product approved by China’s National Medical Products Administration (NMPA). Another product for colorectal cancer testing, PupuTube, is also commercialized and is recommended for quick at-home use.
Two more products are awaiting commercialization: UU Tube and CerviClear. UU Tube is for the detection of gastric cancer; its registrational trial was completed in November 2020 and is now undergoing registration. The fourth, CerviCear, is a urine-based test for the detection of cervical cancer, and is awaiting registrational trial.
Conquering Cancer Early
“We focus on high-incidence cancer types and trying to make them widely available,” Yu Gao, New Horizon’s chief financial officer, told CapitalWatch in an interview.
If detected early, colorectal cancer is one of the most curable and preventive cancers. The cancer, which forms detectable precancerous lesions, takes years to develop into advanced adenoma, allowing plenty time for detection and surgical removal. In China, where colorectal cancer screening has not reached such high adoption rate as in the United States, the five-year survival rate is 56.9% - compared to 100% if detected and removed early, according to Frost & Sullivan. Furthermore, early diagnosis and treatment comes at significantly lower costs than at later stages.
It is for these reasons that colorectal cancer is one of the few cancer types recommended for regular screening among average-risk populations. In China, the at-risk demographic is urban citizens aged 40 to 74, a population which reached 633 million in 2019 and is projected to grow to 758 million by 2030, according to the China Anti-Cancer Association. And the number is projected to grow to 758 million by 2030. In the same year, the high-risk population – persons with a family history or have relevant symptoms – is forecasted to reach 162.2 million.
“There is dire shortage of screening in China and the penetration rate is low – at 16%,” Gao told CW.
“Our product is a non-invasive alternative to colonoscopy,” Gao said, though he specified that New Horizon is not competing with colonoscopy but rather supplementing it, bringing cancer screening to patients’ homes similar as one would use a pregnancy stick.
First, a patient would use PupuTube, which costs 99 yuan ($6) and would get the results at home after testing a stool sample. A positive result would lead to further testing via colonoscopy or the non-invasive ColoClear test – which has a higher accuracy rate than PupuTube and involves lab analysis. This test, which costs about 2,000 yuan ($280), requires a user to mail a sample to a New Horizon lab
In the United States, a similar product on the market, ColoGuard, works using the same principle but incorporates different development technology. ColoClear is less pricy and is tailored to Asian ethnicities.
New Horizon’s prospectus states, “ColoClear’s underlying FIT-DNA technology utilizes qPCR and fecal immunochemical method to detect the presence of KRAS gene mutation, BMP3/NDRG4 gene methylation, and hemoglobin, which enables it to demonstrate a high sensitivity in detecting precancerous lesions.”
Gao told CW that New Horizon’s key differentiator is its commitment to cancer screening.
“We have no other products. There are few biotech companies that attempt to enter the cancer screening market. And even fewer go as far as getting NMPA approval.” He added that the NMPA is known for its conservative attitude towards innovative products and poses a high bar for entry to the market.
“We are the trailblazer not only on the technology front, but also on the regulatory aspect as well,” Gao said.
Propelled by government support, working with the NMPA on the way to raise cancer screening adoption, and working with hospitals and other channels lays out a clear growth trajectory for New Horizon.
Boosting Sales: A Key Post-IPO Goal
New Horizon plans to use the new capital to advance the sales and development of ColoClear and PupuTube. Among the planned measures is the education of hospitals and doctors on the use of the products, as well as marketing campaigns via numerous channels. A critical strategic component is the use of KOLs to raise awareness of early detection benefits and the accessibility of New Horizon’s non-invasive, at-home product use. According to the prospectus, the company will cover at least 500 hospitals and engage 500 trained sales representatives for this purpose.
Further, New Horizon expects to invest in labs and testing facilities to respond to the anticipated demand from patients. The company will use automation to reduce manufacturing and testing costs and improve profitability, it said. In addition, post-approval studies of ColoClear are in the early planning stage.
Another portion of the IPO proceeds will fund the ongoing and planned R&D of UU Tube and CerviClear, as well as New Horizon’s other early-stage pipeline products, which the company has yet to reveal.
To advance the commercialization of UU Tube, New Horizon plans to increase the awareness of gastric cancer screening and increase market penetration. For CerviClear, the company is planning registrational clinical trials and preparation for registration filings. According to Gao, the large-scale trials of CerviClear are expected to launch this year and will take three-to-four years to complete.
Additional innovation plans are in the technology advancement. “We plan to enhance the development of our platforms of genomics, epigenomics and proteomics and build up the platforms of transcriptomics and metabolomics,” New Horizon said in its filing. Another goal is the establishment of a multipronged, multi-stage platform that will enhance its products’ registrational trial processes and propel to commercialization.
The company also plans to continue to diversify its product portfolio through potential acquisition or in-licensing of product candidates that will complement New Horizon’s cancer screening pipeline.
On the question of potential overseas expansion, New Horizon’s chief executive Zhu said the company will focus on China as its primary market. However, other possibilities may arise in future. “We are selectively looking at markets outside China, especially in Asia. We are trying to select strategic partners to license out our products and manage the local operations,” he said.
Prior to its IPO, New Horizon raised $160 million from investors including FountainVest Partners, Softbank’s SB China Capital, Legend Capital, Duke Management Co., Qiming Venture Partners, Omniscience Capital, and Exome Asset Management LLC. Through its Hong Kong listing, New Horizon hopes to not only attract investors at home and globally, but also increase awareness of the importance of early cancer screening—and the company’s early detection products—in its regional market.
CEO Yeqing Zhu, formerly a GE Capital executive, co-founded New Horizon in 2015 together with Dr. Yiyou Chen, now chairman and chief scientific officer. They have known each other for over 30 years after forging a friendship at Peking University’s biochemistry department. CFO Yu Gao, with over 13 years of experience as a private equity investor in the healthcare space, served with FountainVest Partners, as well as Bank of America Merrill Lynch in New York, among other roles.
“We have built solid mutual trust in our management team,” Zhu said. “We are ready to grow bigger. There is a huge market potential in China for cancer screening and we will be the only player in this market in the next five years. And we have a very experienced and balanced team and a clear vision to execute over the next 10 years.”
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