The rise of Athenex: From sharing a UB lab to going public as a global corporation

Today, Athenex is one of Buffalo’s best-known life sciences companies.

The firm, which develops cancer therapies, employs nearly 500 people, including 130 in Western New York. It’s headquartered in downtown Buffalo, has a factory in Newstead and is opening a large manufacturing facility in Dunkirk. It has offices in Asia and across the U.S. It has been publicly traded on the Nasdaq since last year, when it raised $66 million in an initial public offering (IPO).

But back in the early 2000s, the company was just an idea, born from a series of discoveries made in the lab of UB medicinal chemist David Hangauer.

Hangauer was unusual for an academic: He had started his career in private industry, joining the UB faculty in 1989 after spending a decade as a scientist at pharmaceutical giant Merck. He was passionate about research, but also had an entrepreneurial bent.

Hangauer co-founded Athenex, then called Kinex, in 2003, and spent the next 13 years working to build the company into one of UB’s most successful spinoffs.

The university supported him along the way, patenting a drug discovery process called “Mimetica” that his UB team developed, and backing his company with funding for research and development (R&D). Athenex’s first lab was at UB, consisting initially of space carved out of Hangauer’s faculty lab.

Now, the university’s investments are paying off for Western New York — and for UB. As part of Athenex’s original agreement to license Hangauer’s UB discoveries, the university received company stock. In September 2017, UB sold its shares for $5.8 million. In accordance with university policy, the majority will return to UB, to be reinvested in research and education.

“Athenex is a wonderful success story for UB and for the region,” says Venu Govindaraju, vice president for research and economic development. “It shows how university research can lead to innovations that benefit society while helping drive economic development. By bringing discoveries from the lab into industry, it has grown into a company providing high-paying jobs to Western New Yorkers, including many UB graduates.

“As a faculty inventor, Dr. Hangauer worked tirelessly to grow his company, with the dual goals of helping cancer patients and helping the Buffalo area prosper,” Govindaraju says. “His achievements as an entrepreneur are impressive, and I hope his success will inspire other UB researchers to follow in the same path.”

Dozens of UB faculty, staff and students have launched spinoff companies in recent years, including many in Buffalo Niagara’s growing life sciences sector. These include companies such as Abcombi Biosciences, which is developing a pneumonia vaccine; Cytocybernetics, which screens new drugs for harmful side effects; and For-Robin, which is also developing a cancer drug.

Launching the company was a personal decision for Hangauer, a UB chemistry PhD graduate and Buffalo native with a history of cancer in his family.

“My primary motivation for starting Kinex/Athenex was to transform the academic science I was doing into drugs that are of benefit to cancer patients,” he says. “My father died of cancer, as did my father-in-law, and my youngest son is a cancer survivor, among others close to me.

“My secondary motivation was to produce a company in Buffalo that would prosper and employ people, thereby contributing to the local economy. Thirdly, I wanted to demonstrate to others in Buffalo that this can be done.”

To get Kinex off the ground, Hangauer tapped a fellow UB alumnus as CEO: Allen Barnett, who earned his PhD in pharmacology at UB. Barnett was a pharmaceutical executive with national name recognition. At Schering-Plough, then a competitor of Merck, he had led the effort to develop Claritin and Zetia, two multibillion-dollar drugs, and two other drugs that made it to market.

Barnett also helped recruit Johnson Lau as another co-founder of the company. Lau, also a former Schering-Plough executive, joined Kinex as chairman of the board, a role he still holds today. Bringing Lau on was a prescient move: Lau, an MD and pharmaceutical executive with international connections, was named CEO upon Barnett’s retirement in 2012 and has led the company to further growth, including the firm’s globalization and the successful IPO in 2017.

“I knew I couldn’t do everything myself, so I brought co-founders into Kinex, and I liberally shared the founders’ equity with them,” Hangauer says. “This was a key to success. Inventors often think the company is overwhelmingly their science, and that other people’s contributions are small by comparison. But the business — the fundraising, the day-to-day operations — are also critically important, and that needs to be recognized when establishing a new company.”

Like Hangauer, Barnett was committed to Buffalo and to Kinex on a personal level. His wife was from the area, and he had lost his granddaughter, Carly, to brain cancer. (She was the founder of Carly’s Club, the well-known local nonprofit that raises funds for pediatric cancer research and supports programs at Roswell Park Comprehensive Cancer Center for kids with cancer.)

When Hangauer first approached Barnett to head Kinex, Barnett was caught off guard. “I had spent my career as a scientist. I’ve never wanted to be a CEO or said it’s the next logical step for me,” Barnett says. “It never rang a bell.” But in the end, he took the job. “I wanted to do this for my granddaughter. That provided a lot of motivation for me.”

UB was a vital partner in Kinex’s early days. As an early order of business, the company began negotiations to license Hangauer’s research discoveries from the university. Robert Genco, who oversaw UB’s technology transfer team, was instrumental in formulating a deal.

The firm had no laboratories yet, so its scientists set up shop in Hangauer’s UB lab.  

“Chemistry requires special workspace, so I did what’s called a facilities use agreement with UB where I could carve out that little bit of space in my lab and have part-time employees from the company work in that space and make compounds,” says Hangauer, who served as the firm’s chief scientific officer. “It was like a Kinex embassy, and it was a lot cheaper and faster than contracting the work to outside companies.”

As Kinex grew, UB aided its expansion, providing early R&D funding through the UB Center for Advanced Technology in Big Data and Health Sciences (UB CAT), which supports collaborations between university researchers and industry.

“When you’re starting a company, every dollar counts,” Barnett says. “Later on, Chuck Lannon, who helped a number of startups in the area raise funds, really helped us, but at the beginning, we were scratching around, trying everything to raise money, and these awards from UB were really very helpful.”

When the time came to open a headquarters with lab space, Kinex turned to UB again.

The company located downtown in UB’s New York State Center of Excellence in Bioinformatics and Life Sciences not long after the building’s 2006 opening. There, the firm collaborated with UB scientists and used the clean room — a highly specialized facility — to manufacture drug capsules for early clinical trials of KX-01, one of the cancer therapies in the company’s pipeline. Though the firm’s headquarters have moved to new offices on the Buffalo Niagara Medical Campus, Athenex still maintains offices and lab space in the building.

“We worked well with the university people,” Barnett says. “We got a lot of help from them. Whenever we were looking for space or had a problem, there were people there — Bob Genco and Jeff Dunbar with the technology transfer team, Bruce Holm, who ran the Center of Excellence — who were very supportive. They were always willing to hear what we had to say and help.”

As Hangauer’s work with Kinex intensified, UB continued its support, allowing him to scale back on teaching and research from 2010 until he retired as an associate professor of chemistry in 2013.

“UB’s flexibility with my schedule showed that they were committed to entrepreneurship,” Hangauer says. “It enabled me to focus on moving the company forward at a critical time, and I think that has paid off.”

As Kinex’s chief scientific officer, Hangauer oversaw key research during a period of rapid growth. This growth included a name change to Athenex in 2015 and the firm’s globalization under the leadership of Johnson Lau, who became CEO in 2012. With Lau at the helm, Athenex opened overseas facilities, raised more than $200 million in private funds from Asian investors, secured a $225 million investment from New York State for the company’s Western New York-based operations, grew the company to nearly 500 employees globally, and took the company public on the Nasdaq Stock Exchange in 2017.

Hangauer retired in 2016, but he takes pride in Athenex’s continued success. Several of his former PhD students still work for Athenex, including Michael Smolinski, the company’s director of preclinical operations.

“I put my heart and soul into this company,” Hangauer says. “Besides teaching and research, I put a lot of energy into this company, and it is wonderful to see it continue to grow.”

Those at UB who have supported Athenex since its early days are also gratified to see how far the company has come.

“I’m so proud of the partnership between UB and Athenex,” Genco says. “I’m from Chautauqua County, from Silver Creek, so it has been exciting to follow all the news about the company’s growth, including its plans to build that factory in Dunkirk.”

Though Hangauer and Barnett have retired from Athenex, Lau — CEO and chairman of the board — has continued to cultivate the company’s partnership with UB.

Most recently, Lau and Teresa Bair, Athenex vice president for corporate development and legal affairs, visited Asia in late January with partners from Western New York that included UB President Satish K. Tripathi and Vice Provost for International Education Stephen Dunnett. During the trip, Athenex and UB met with universities and institutes in Hong Kong and China, with the goal of exploring new R&D collaborations in a region where both Athenex and UB are already very active, with many existing partnerships.

“Our visit to China with UB, where we met with four Chinese universities to explore opportunities for innovative R&D collaborations, was a significant milestone in the evolution of UB and Athenex working together,” says Bair, also a UB law school graduate. “Now we’re joining forces for continued global growth with international partners.”

Looking back to 15 years ago, Hangauer and Barnett feel that much has changed in Buffalo for entrepreneurs.

“The startup scene in Western New York was nothing like it is today. People were not familiar with biotech companies at all,” Barnett says. “UB, at that time, was not exactly known as a household name for spinning off successful companies. It’s totally changed now, and we’d like to think we had something to do with that.”

“Kinex is an example of what can happen when you invest in startups, and I think more people are interested now, and the culture is starting to turn,” Hangauer says. “At the university, a lot of faculty — especially younger faculty — are very interested.”

As an institution, UB has increased support for entrepreneurs. Programs designed to accelerate commercialization range from new sources of R&D funding to a recently launched National Science Foundation I-Corps Site program, which is run by the Business and Entrepreneur Partnerships teams in UB’s Office of the Vice President for Research and Economic Development to help faculty inventors conduct market research on innovations. The Blackstone LaunchPad at UB, new in 2016, introduces students and others on campus to entrepreneurship as a viable career path and provides coaching to help get ventures off the ground.

The entrepreneurial ecosystem in Western New York is stronger than ever today, and Hangauer hopes Athenex inspires other academics to take the leap into industry.

“The whole story for me with Athenex is 15 years. So anybody who thinks it’s a short thing to take a company, get it started and have it either do an IPO or get acquired, it’s not — it’s usually a decade or more,” Hangauer says. “But it can be done — Athenex is a success case that shows you can do it, and you can do it here in Buffalo.

“It can be done, and it can be done by a regular UB faculty member from the chemistry department.”