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Athenex – Too little, too late

Poorly designed clinical study for flagship drug outdated since 2005. Meanwhile, Directors siphon large amounts of cash from shareholders.


October 22, 2019 – Viceroy Research is short Athenex, Inc. (NASDAQ: ATNX). Our research has found significant causes for concern in the company’s operations, management and clinical trial design. Our research, paired with discussions with industry specialists, leads us to believe Oraxol is obsolete in modern world medicine. We conclude that Athenex exists to abuse capital markets and enrich its management through related party transactions and licensing deals, rather than bring revolutionary drugs into the market.

Viceroy value ATNX stock at US$2.83 – a 71% downside –the sum of its tangible book value and 1x valuation on its licensing & consulting revenue streams, for the year ending June 30, 2019. With ATNX’s questionable license acquisitions and management’s precedent for overstated top line figures in previous ventures: this is optimistic.

Management – A Company of Rogues

  • Several members of Athenex’s management team have a history of what appears to be either gross incompetence in fiduciary duties or clever mismanagement in infamous frauds internationally, collectively resulting in billions of dollars of write-offs including Sino Forest and Suntech.
  • ATNX directors have also acted as sellers and drop-shippers to rip off Athenex shareholders with margin-stealing exercises through their investment entity: Avalon Global. Cash has consistently exited the business via similar related party deals.
  • Breaches in corporate governance principles: Athenex directors screwed investors by purchasing CDE for themselves and flipping it to Athenex for a 262% profit in 6 weeks. The company failed to report the circumstances of the transaction in any meaningful way.
  • In a separate instance, Directors pocketed a 3,300% profitby flipping an “anti-cancer mechanism” license to Athenex for US$5m, for which they paid just US$150,000 just 6 months earlier.
  • Directors award themselves millions of dollars’ worth of stock at no cost through the issuance of promissory notes that are cancelled on a time-vested basis.
  • Athenex directorshave an uncanny ability to avoid any disclosure or reference to their involvement in historical fraud or related party deals. It’s Viceroy’s view that if investors were aware, they would not have bought $ATNX in the first place. 
  • Athenex’s CFO J. Nick Riehle left unexpectedly for a “planned” retirement, just 10 months after joining the company but is now seeking work as a consultant.

Oraxol – Flagship or Shipwreck?

Athenex has been reliant on the marketed prospect of Oraxol in order to obtain access to capital, having received going concern qualifications from Deloitte since 2016 and current yearly cash-burn rates of ~$100m. The company has raised ~US$360m in equity and US$80m in debt since 2017. Even if R&D costs are removed from the equation, Athenex’s licensing and consulting segments are operationally loss-making.

  • After consultation with industry specialists and oncologists, Viceroy believes Athenex’s flagship paclitaxel drug, Oraxol, cannot compete with the current standard of care available in the USA.
  • Oraxol’s clinical trial’s control dosing regimen of IV paclitaxel as monotherapy is an outdated treatment schedule dating from the 1990’s.
  • Oraxol’s marketed quality of life improvements are redundant. Patients will still require IV /treatment post-treatment, alongside complications from oral treatment.
  • Oraxol’s side effects appear more severe than those of the current US standard of care, Abraxane, and may require hospitalization due to their life-threatening nature. Reported adverse effects grade 4 neutropenia, grade 3 vomiting and unspecified GI complications were more severe than IV paclitaxel intake.
  • None of Oraxol’s clinical trials have included a US patient component. While the FDA does allow data overseas trials, these results are treated with much higher scrutiny. Viceroy believe ATNX studies are being conducted in South America due to a lower local standard of care: US patients could not be enticed to trial a drug against an outdated active control regimen.
  • Athenex’s Orascovery program – key to its marketed value proposition – was purchased for just US$7.5m upfront in 2011 after its previous owner experienced decade-long development delays with little headway into development. The Orascovery platform is busted.
  • Through consultation with experts, we believe Athenex’s pursuit of the 505b(2) pathway for Oraxol will be hampered by the fact that its paclitaxel delivery mechanism, HM30181A, has never been approved by the FDA. The FDA may require Athenex to pursue a further NDA for HM30181A.
  • Viceroy have identified what we believe to be Intellectual Property Theft from UK company Immunocore. XLifeSc’s flagship technology (in which ATNX put $35m upfront) may already be owned by GSK and further along the development pipeline: GSK’s solution is currently undergoing phase 2 trials in the US.


Athenex’s operational and R&D cash-burn rate is over US$100m a year – the company would be lucky to survive until HY 2020 without needing a further cash injection from investors. Even if Athenex scrapped its R&D completely, the company’s revenue streams operate at a substantial loss.

Accordingly, we believe our valuation of $2.83 is optimistic, and will be realized in the short term. We do not see a future for the company in its current state.

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