Xtalpi, a Shenzhen-based AI drug discovery company, saw its shares soar 108% on the Hong Kong stock exchange over the past week, boosting its market cap to $5.5 billion.
The stock price rise comes on the back of Xtalpi’s sales growth and its more than $135 million deal with Chinese billionaire Zhu Gongshan’s energy company GCL Group.
Known formally as QuantumPharm, the Hong Kong-listed company posted a 28% year-over-year rise in revenue to 102.6 million yuan ($14.4 million) in the first half of 2024, the company said in a filing last Wednesday. Xtalpi attributed the sales growth to the increased number of customers of its AI-powered drug discovery services. Its customers include Pfizer, Johnson & Johnson, Sino Biopharmaceutical subsidiary Chia Tai Tianqing Pharmaceutical Group and CK Life Sciences, the biotech arm of Hong Kong billionaire Li Ka-shing’s CK Hutchison Holdings.
Part of the revenue growth came from its first-ever milestone payment, at an undisclosed amount, from Signet Therapeutics, a Chinese biotech startup backed by Xtalpi and Forbes Midas Lister Richard Liu’s 5Y Capital. The milestone payment came after a potential drug the two companies co-developed for diffuse gastric cancer, a form of stomach cancer, received approval from the U.S. Food and Drug Administration to begin human clinical trials.
Xtalpi’s net loss, however, widened 46% to 1.3 billion yuan in the first six months of 2024 from the previous year. The company said it’s due partly to the drop in interest income and an increase in expenses such as the listing fees. Xtalpi has continued to invest heavily in research and development, spending 210.4 million yuan in the first half of the year, though that’s roughly 10% less from the previous year.
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Meanwhile, Xtalpi in late August entered into a five-year partnership with Chinese energy and power company GCL Group in a deal worth more than $135 million. Under the collaboration, the two companies will jointly research and develop new materials in areas such as lithium-ion batteries, which are used in electric vehicles.
Cofounded by Wen Shuhao, Ma Jian and Lai Lipeng—three Chinese quantum physicists from the Massachusetts Institute of Technology—Xtalpi combines AI, quantum physics, cloud computing and robotic automation to find novel molecules that could be developed into new medicines. Its drug candidate for primary hyperoxaluria, which causes kidney stones, is set to enter clinical safety evaluation for human in Australia in the first half of 2025, Xtalpi said.
Recently, Xtalpi has also expanded into discovering new chemical compounds for applications such as agriculture, cosmetic, healthcare, as well as petrochemicals and new materials for EV batteries.
The company has attracted investors from the likes of Tencent, Chinese billionaire Neil Shen’s Hongshan (formerly Sequoia China), 5Y Capital, Google, U.S. billionaire Jeff Yass’ Susquehanna International Group, Chinese tycoon Tse Ping’s Sino Biopharmaceutical and SoftBank’s Vision Fund 2, among others.
Xtalpi was the first to go public under a Hong Kong new listing rule for specialist technology companies with smaller market cap and lower revenue, which was introduced more than a year ago to revive the city’s sluggish IPO market. After raising HK$989.3 million ($126.7 million) in its IPO in June, Xtalpi is set to be included as a constituent stock of Hong Kong’s benchmark Hang Seng Index on Monday.
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