Bringing the first domestic new crown drug to Hong Kong for listing, the risk of “single deposit” of real organisms cannot be ignored丨IPO Express

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The picture comes from Visual China

The picture comes from Visual China

In order to win the title of “The No. 1 Oral Drug for the New Crown”, real creatures are charging fast. On August 4, Henan True Biotechnology Co., Ltd. submitted a prospectus for listing application to the main board of the Hong Kong Stock Exchange, with CICC as the sole sponsor.

With the real organism of the first domestically produced new crown oral drug, the launch plan is extremely “hurried”. 10 days ago, the company’s azvudine tablets were just approved with conditions for the treatment of new indications for new coronary pneumonia. On August 2, azvudine tablets were officially put into production. “Diagnosis and Treatment Plan for Novel Coronavirus Pneumonia (Ninth Edition)”.

Large losses and almost no income. Like the biopharmaceutical companies listed under the 18A system of the Hong Kong stock market, the financial data of real biology is lackluster. The company’s biggest bright spot is the new crown oral drug Azvudine tablets. If Real Bio can be successfully listed, its stock price trend in the next few years will depend on the sales performance of this single drug.

For real creatures, it is indeed the best time to go to market now, holding the “first drug” of the new crown orally and in the midst of huge losses. However, from the perspective of the entire capital market, entering 2022, many companies’ new crown-related business has been difficult to win the “favor” of capital, and even bears worries.

There is still a question mark on how much capital support the new crown oral drug can win for real organisms. However, Real Bio is also promoting the entry of Azvudine tablets into medical insurance, which will affect the attitude of the secondary market to a certain extent. From an industry perspective, the approval of Azvudine tablets seems to be going smoothly, but the controversy accompanying this drug has not stopped so far.

Can’t wait, catch up with the last train of the new crown “bonus”

According to the prospectus, Real Biology was established in 2012 and has only two rounds of financing in October 2020 and August 2021, with a total of 713 million yuan. So far, the company has not achieved revenue, but the money is not enough to spend.

In the other income and income categories of Real Creatures, the company’s accumulated income from the beginning of 2020 to the end of May 2022 was 9.895 million yuan, of which 6.434 million yuan was the net exchange gain, and there were 930,000 yuan in government subsidies and 1.226 million yuan. Bank interest and gains from changes in fair value.

Compared with these meager incomes, real biology is generous in spending, especially R&D expenses are high, which is also a common feature of unrealized revenue biopharmaceutical companies. According to the prospectus data, from 2020 to the end of May 2022, the cumulative R&D expenditure of real organisms was 284 million yuan, of which 114 million yuan was spent in the first five months of 2022 alone, a year-on-year increase of 714.29%, exceeding the previous single-year R&D expenses. .


Mapping by Titanium Media App; data source: prospectus

R&D spending in the first five months of 2022 increased significantly year-on-year, mainly due to a seven-fold year-on-year increase in third-party contract costs, and a doubling of staff costs, which mainly include payments to CROs, hospitals and other medical institutions, and Inspection fees for preclinical research and clinical trials.

In China, Real Bio was approved to start a Phase III clinical trial of azvudine in the treatment of COVID-19 in April 2020. In 2021, the new crown epidemic is basically under control in China, and the number of infected people is relatively small, and the recruitment of patients for its phase III clinical trials will also slow down . In June, Real Bio completed the Phase III clinical trial of azvudine in the treatment of new coronary pneumonia in China, and the related R&D expenditure also increased.

From an R&D perspective alone, Real Bio is transferring early-stage clinical-stage drug candidates to later-stage clinical trials, advancing pre-clinical programs into clinical trials, and continuing to expand clinical development of drug candidates to treat more indications , it is foreseeable that it will continue to generate large R&D expenditures in the future.

In July 2021, the State Food and Drug Administration conditionally approved the New Drug Application (NDA) of Azvudine for the treatment of HIV-1-infected patients over 18 years old. According to the relevant approval, for this indication, Real Biology needs to submit regular safety reports. And submit the Phase III clinical trial report within five years from the approval date. In June this year, Real Bio launched the Phase III clinical trial, which is expected to be completed in 2026.

It is expected that the research and development expenditure of Real Bio will continue to grow in the future. At the same time, the commercialization of Azvudine’s new coronary pneumonia indication is imminent, which also requires huge investment in sales and distribution.

However, Real Creatures is caught in a financial dilemma: on the one hand, there are huge losses in the past two years. From 2020 to the end of May 2022, Real Creatures has accumulated a loss of 566 million yuan, of which only the first 5 months of 2022 will lose 2.18 On the other hand, the company ‘s funds are stretched. As of the end of May 2022, its cash and cash equivalents are only about 263 million yuan. Even at the speed of “burning money” in the past, these funds cannot be supported for long, and may even reach Before next year, it will have bottomed out.


The picture comes from the prospectus


The picture comes from the prospectus

Real Biology stated bluntly in the prospectus, ” Our existing cash and cash equivalents are not sufficient for us to complete the development of all current drug candidates or commercialize all current drug candidates and invest in additional projects. Therefore, we will need to make public or Private equity offerings, debt financing, partnership and licensing arrangements or other means to obtain further funding.”

Seeking financial support in the open market is the best choice for Real Bio at present. With the good news that Azvudine tablets are conditionally approved for the treatment of new coronary pneumonia, Real Bio is a biopharmaceutical with a monotonous R&D pipeline and multiple products in the early stage. Enterprises may be able to obtain high valuations in the capital market.

It should be noted that in 2020, the new crown-related business helped many companies to hit new highs in the secondary market and boosted their performance to skyrocket. By 2021, the stock prices of these companies will decline and their performance will drop year -on-year. The sustainable growth of the business is full of concerns. Those listed companies that still have main businesses are affected by such pessimism. Real creatures are completely dependent on the new coronary pneumonia market. Whether it will be affected, we will continue to wait and see.

Obviously, on the same day (July 25) that Real Bio officially announced that Azvudine tablets were conditionally approved for the treatment of new coronary pneumonia, Fosun Pharma (02196.HK/600196.SH) also officially announced the exclusive commercialization of Azvudine (in the field of novel coronavirus, AIDS treatment and prevention) with Real Bio. The news did not boost the company’s stock price, and on July 26, Fosun Pharma ‘s A shares closed down 3.11%, and H shares closed down 2.71%. Since the announcement of the cooperation, The stock price trend of Fosun Pharma Port A is an overall downward trend.

At present, how can the new crown indication Azvudine bring certain growth to the company? The most important way is to enter the medical insurance. Real Biology stated in the prospectus, “We plan to seek the inclusion of Azevudine in China’s National Medical Insurance Catalog”.

“Bold” real creatures that don’t take the usual path

It is the most “desperate” decision of Real Life to start the listing plan with only one drug for AIDS and new coronary pneumonia indications.

From the perspective of R&D pipeline, besides azvudine, the anti-tumor drug doxitinib is the fastest in real biological progress. The drug was approved in April 2020 to conduct a phase I/II clinical trial in China for the treatment of advanced EGFR mutation-positive non-small cell lung cancer (NSCLC) . 7 years to be approved for listing.

That is to say, if Real Life can be successfully listed, its stock price will be “fed” by Azevudine in the next few years. As mentioned above, its indications for new coronary pneumonia are at risk of dramatic changes in the market environment.

Up to now, about 50 companies around the world have entered clinical development of antiviral drugs for COVID-19. These include remdesivir, which has been approved by the FDA in 2020, monapilavir and Paxlovid, which have been granted FDA EUA in 2021. In February this year, Paxlovid also obtained conditional approval from the State Food and Drug Administration. in the treatment of new coronary pneumonia in China. In addition, VV116 of Junshi Bio (01877.HK/688180.SH), Favipiravir of Hisun Pharmaceuticals (600267.SH), and GT0918 of Kintor Pharmaceuticals (09939.HK) have entered Phase III clinical trials.


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From a domestic point of view, Hisun Pharmaceutical is a profitable enterprise with existing drug sales revenue, Junshi Bio is one of the four domestic PD-1 gentlemen, and Kintor Pharmaceutical is still losing money, but its prospectus is in the R&D pipeline disclosed in the 2021 annual report. , the number of clinical trials in 5 categories has increased from 15 clinical trials to 23 clinical trials in 7 categories, of which phase III clinical trials have increased from 2 pre-marketing to 6, and 3 pre-clinical products that have been updated have been launched. to the pre-clinical period.

On the other hand, the R&D pipeline mainly involves HIV infection, new crown, and hematological tumors. A total of 12 projects are in progress, and most of them are in the preclinical stage.


The picture comes from the prospectus

In addition, the azvudine tablet itself, which has been conditionally approved by the State Food and Drug Administration for the treatment of new coronary pneumonia, is also controversial.

First, a total of 348 patients were recruited in the Phase III clinical trial of Azvudine for the treatment of new coronary pneumonia, and the number of patients in the experimental group and the control group were 174 and 174, respectively. Although this scale meets the minimum standard of no less than 300 cases, doubts still exist that the enrollment scale is too small. As a comparison, Junshi Bio ‘s Phase III clinical trial of VV116 actually enrolled 822 patients.

Secondly, the side effects caused by real biological azvudine have also attracted much attention. Azvudine was approved for HIV treatment in July 2021 based on a phase 2 non-inferiority trial. The technical review report for this approval showed that the Azvudine Ames assay, the in vitro Chinese hamster lung cell chromosomal aberration assay and the small The results of micronucleus test of bone marrow cells in mice were all positive. In addition, many results were positive in rats and rabbits, two commonly used reproductive toxicity experimental animals. Based on this, the genotoxicity and reproductive toxicity of Azvudine cannot be ignored.

On August 9, Azvudine tablets were included in the “New Coronavirus Pneumonia Diagnosis and Treatment Program (Ninth Edition)”, which clearly stipulates that it is suitable for adult patients and is not recommended for use during pregnancy and lactation. Regarding the safety of the drug for the treatment of new crowns, Real Biology stated in the prospectus that because the effective dose level is lower, Azvudine tablets are safer, and there are fewer concerns about drug interactions in combination therapy.

The dose of azvudine for the treatment of new coronary pneumonia is: 5 mg each time, once a day, the course of treatment does not exceed 14 days. Pfizer ‘s Paxlovid is a combination of a 3CL protease inhibitor and low-dose ritonavir, 300 mg of nirmatrelvir and 100 mg of ritonavir twice a day for 5 days.

Regarding effectiveness, according to the prospectus, in the Phase III clinical trial of Azvudine for patients with new coronary pneumonia in China, the main efficacy indicator was the change in viral load on the 7th and 14th days of treatment. The results showed that azvudine effectively reduced the baseline viral load, and the proportion of subjects whose clinical symptoms improved on the 7th day after the first dose was 40.43% in the azvudine group and 10.87% in the placebo group. Azvudine has the effect of inhibiting the activity of the new coronavirus, and the virus clearance time is about 5 days.

In addition to the discussion around the core drug Azvudine, the company’s background is also very special.

Wang Chaoyang, the founder and one of the controlling shareholders of Real Biocontrol, was the first “coal boss” . In 2007, Wang Chaoyang co-founded Songxian Juxin Mining Co., Ltd. and held 70% of the shares. The company has now been cancelled. At present, he also holds 70% of the shares of Pingdingshan Baoyuan Coking Co., Ltd. In 2008, Dynasty Yang established Xingyu Zhongke, which is mainly active in the real estate industry. Dynasty Yang was also restricted from consumption due to financial borrowing and private borrowing problems of another real estate company, Henan Chaoyang Real Estate Co., Ltd.
The picture comes from the prospectus

The picture is from the prospectus (Note: Sanlian Venture Capital is wholly owned by Wangchaoyang)

The episode happened in 2011, Xingyu Zhongke acquired the intellectual property rights of Azvudine, and Real Biology was established in 2012. However, Chaoyang, as one of the current controlling shareholders of Real Biology, did not hold an important position in the company. On September 26, 2019, Wang Chaoyang was appointed as a non-executive director of the company and resigned on August 1, 2022.

Just in the two rounds of financing that Real Life has completed, “Yifeng Capital” has not been absent. This is the first batch of professional biomedical investment institutions in China, and it is somewhat “magic”.

Zhu Jinqiao, the founder and chairman of Yifeng Capital, is the honorary chairman of the Hong Kong Biomedical Innovation Association and the initiator of the Investment Committee of the China Pharmaceutical Innovation Promotion Association. Among its founders is Ren Zhengli, the sister of Huawei founder Ren Zhengfei, former China Merchants Bank. Chang Ma Weihua and former director of the Chinese Center for Disease Control and Prevention Wang Yu are both executives of Yifeng Capital.

In addition to Real Biology, none of the 46 medical and health projects invested by Yifeng Capital, among which Frontier Bio, Zhongsheng Ruichuang, Harbin Pharmaceutical, Ascentage and other companies are also deploying new crown drugs.

From business to equity relations, there are many “special” things about real creatures that have suddenly entered the public eye since the epidemic. The “hurried” listing is behind the situation, but the capital market is turbulent, and the epidemic dividend will not last for a long time. , the growth path of real creatures, the end is near. If the company can make a lot of quick money in the sales of the first domestic new crown drug and enrich its operating cash flow, it may consider investing in mergers and acquisitions to feed back the company’s single commercial product line.

(This article was first published on Titanium Media App by Yang Yaru Edited by Sun Cheng)

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