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Athenex – Where there’s smoke…

Author: Published on: Published in: Athenex NASDAQ:ATNX

Athenex’s revenue generating business is a house of cards, muddled with further ties to large scale frauds, fabricated management credentials, and photoshopped offices.

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October 23, 2019 – This follow up report focuses specifically on Athenex’s Polymed subsidiary, which accounts for a large portion of Athenex’s revenues and capital expenditure:

  • Our investigations have found ties between Polymed and its management team’s ties to the largest taxol smuggling ring in history Hande Yunnan, resulting in 50 arrests and 32 imprisonments. Major perpetrators and shareholders of this scheme now work for Athenex.
  • Polymed appears to continue sourcing its taxol from Hande Yunnan, despite the fact that our investigations show Hande Yunnan no longer produce taxol.
  • Further inspection of Polymed’s management show inconsistencies in prior executive roles, specifically of William Zuo. Zuo was also the US liaison of bringing smuggled taxol to the USA.
  • A deep dive into Chinese regulatory notes from the Ministry of Emergency Management, coupled with Polymed’s history of objectionable site inspections by Chinese regulators and the FDA, lead us to believe that Polymed’s manufacturing facility suspension was anything but voluntary. In any event, Athenex’s manufacturing facility does not manufacture anything.
  • Viceroy dismantles photoshopped Polymed advertisements for its facilities and expose chemical manufacturing facilities we believe are non-existent or outsourced.

Viceroy remains short Athenex with high conviction. The quantum of red flags uncovered within the business and management team surpass any other company we have previously analyzed purely within data sourced from the public domain.

We reiterate our target price of $2.83, now representing a 75% downside, and will continue to keep investors informed through further reporting.

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. This activity is masqueraded through overpromise in both its flagship drug, Oraxol, and its purported “supply-chain” businesses, such as Polymed.

Athenex is a perfect storm of investor deception, insider enrichment and clinical trial risks. Investors should demand a full investigation of the issues discussed within this report: we are confident there is more to this story given how much was available purely through the public domain.

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. Viceroy’s preliminary report on Athenex can be found in the below link:

https://viceroyresearch.org/2019/10/22/athenex-too-little-too-late/

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