How Can Haichuang Pharmaceutical Industry Break Into The Science And Technology Innovation Board With No Revenue Of "Red Chip" Pharmaceutical Stocks Raised Privately?

On May 20, the Shanghai Stock Exchange announced that xuantai Pharmaceutical Co., Ltd. and Haichuang Pharmaceutical Co., Ltd. applied for the science and technology innovation board at the same time, and the sponsor institutions were Haitong Securities and CITIC Securities. At the same time, the Shanghai Stock Exchange issued an announcement on May 21 to terminate the examination of Suzhou Ruibo biological's IPO and listing on the science and technology innovation board.

Since this year, in addition to Suzhou Ruibo biological, a number of pharmaceutical enterprises, such as Yiteng Jingang, Tianshi biology, Shanghai Aopu biology, Beijing tianguangshi biology and Dana biology, have terminated their IPO applications on the science and technology innovation board.

Market analysts pointed out that the regulatory authorities may adjust and revise the application rules of the science and technology innovation board in the near future. They will pay more attention to the "hard technology" of the enterprises to be listed, and strengthen the examination of the financial status and other indicators, especially for the problems such as the flaws in the practice of intermediary agencies, the lack of standardization of enterprises, and the weak science and technology ownership.

Under the strict expectation of strict examination on the science and technology innovation board, since this year, the number of IPO terminated enterprises has increased to 44. Among them, 8 pharmaceutical enterprises have chosen to terminate or suspend their listing applications. Nearly 30% of the pharmaceutical enterprises planning to be listed on the science and Technology Innovation Board have already been faced with difficulties and retreated. What will be the choice for the pharmaceutical enterprises that submit their applications later?

Lessons from the termination of the previous car

Compared with the reporters of 21st century economic report, among the two pharmaceutical enterprises accepted on May 20, xuantai pharmaceutical is mainly engaged in the R & D, production and sales of high-end generic drugs and cro services. From 2018 to 2019, the company's revenue is 60.9259 million yuan, 141 million yuan and 317 million yuan respectively, and the corresponding net profits are - 37.4812 million yuan, 4.5352 million yuan and 117 million yuan respectively.

Haichuang Pharmaceutical Co., Ltd. is similar to Suzhou Ruibo biological Co., Ltd., which has recently terminated the listing application. It focuses on the research and development of innovative drugs in the major treatment field. During the reporting period from 2018 to 2020, there are no listed products, and the main product revenue is almost zero. Therefore, it still needs a long time to invest a huge amount of money to develop products.

According to the public information, Suzhou Ruibo biological is an innovative drug R & D enterprise committed to the development of small nucleic acid drugs. Its financial data show that during the reporting period, Suzhou Ruibo biological has not yet formed revenue, and the net profit attributable to its parent has continuously suffered huge losses. The main products are in the R & D stage, and the commercialization has not been realized, and the R & D investment continues to grow at a high level, resulting in the company's accumulated unrecovered losses. Therefore, Rabo bio plans to raise 1.6 billion yuan for drug R & D projects and supplementary working capital.

In the inquiry of the science and technology innovation board, nearly 30 major issues such as the company's historical investment, red chip structure construction, core technology, R & D capability, product pipeline layout under research, marketing market development, related party transactions, violations, R & D expenses, and share based payment of Suzhou Ruibo biology were focused by Shanghai Stock Exchange.

Perhaps because of concerns about the company's standardization and the operation ability of products under research, within a few months after submitting the application draft, Suzhou Ruibo biological actively applied to withdraw the application documents and terminate the IPO related audit matters. And Haichuang pharmaceutical, which was accepted on May 20, seems to have a number of problems similar to those of Suzhou Ruibo biology.

Founded in 2013, Haichuang pharmaceutical is mainly engaged in the research and development of innovative drugs in the fields of tumor and metabolic diseases. Since its establishment, Haichuang pharmaceutical has been in the state of burning money for research and development. In September 2020, Haichuang pharmaceutical completed the c-round fixed increase financing subscribed by 25 institutional investors, including Yingchuang capital, Fosun Pharmaceutical, Boyuan capital and CCB international, with a financing scale of nearly 1 billion yuan. Haichuang Pharmaceutical Co., Ltd. said that the company is an international innovative drug enterprise based on Deuterium technology and protac targeted protein degradation technology, aiming at developing best in class and first in class drugs with significant clinical needs.

By the end of 2020, Haichuang pharmaceutical has 95 employees, including 67 R & D personnel, 28 administrative and management personnel. The company has no production and sales personnel, and the company has not even specifically introduced the company's future production and sales mode in the application draft.

In this regard, Haichuang pharmaceutical directly pointed out that if the company can not meet the needs of business development by improving the management team's operation ability, recruiting new employees and expanding the talent team, the company may not be able to achieve the R & D and commercialization goals.

In addition, from 2018 to 2020, the revenue of Haichuang pharmaceutical was 3.5619 million yuan, 4.2265 million yuan and 0 million yuan respectively, and the net losses were 39 million yuan, 112 million yuan and 490 million yuan respectively. During the reporting period, the company's main products are still under research, and no sales revenue has been formed. The main business income source is mainly technical services. This means that Haichuang pharmaceutical has no products in operation that can be put into the market at present, and it still needs a large amount of continuous capital investment in research and development.

From 2018 to 2020, the R & D investment of Haichuang pharmaceutical was 48.9345 million yuan, 116 million yuan and 429 million yuan respectively. The company expects to increase R & D investment for a period of time in the future. Only for the six research projects that have entered the clinical or clinical application stage from 2021 to 2024, the total amount of investment is expected to be 333 million yuan, 325 million yuan, 221 million yuan and 249 million yuan respectively.

Haichuang pharmaceutical said that during the reporting period, the company had accumulated outstanding losses of 388 million yuan, and the company may continue to make losses in the future, which still needs a huge amount of capital investment. In this listing declaration, Haichuang Pharmaceutical Co., Ltd. plans to raise about 2.504 billion yuan, which is to be used for the research and development of innovative drugs, the construction of R & D production bases and the supplement of development reserve funds.

It is worth noting that before breaking through the science and technology innovation board, Haichuang pharmaceutical, like Suzhou Ruibo biology, was eager to expand financing channels and established a red chip structure in August 2018. However, considering the actual operation of the enterprise, it eventually changed its overseas listing strategy. In April 2020, the company dismantled the red chip structure and prepared to return to the domestic market.

It was only in the last year that Haichuang pharmaceutical completed the necessary steps before listing, such as dismantling the red chip structure, dissolving the equity holding agency, equity financing and the transfer of old shares. Suzhou Ruibo biological has chosen to terminate the listing application. What expectations can Haichuang pharmaceutical bring to the market?

Invisible revenue

According to the development goal of Haichuang pharmaceutical, the company will rapidly promote the R & D and commercialization process of pipeline products under research. In the next few years, the company will carry out research and development of more than 10 class 1 new drug varieties, vigorously promote the progress of clinical trials of projects under research, and apply for and obtain drug marketing license.

As of the first quarter of 2021, Haichuang Pharmaceutical Co., Ltd. has 10 products under research. Among them, one product (hc-1119) is conducting two phase III clinical trials simultaneously, one product (hp501) has entered phase II clinical trial, and one product (hp558) has completed phase I clinical trial in Europe, and is applying for ind in China and preparing to start phase II clinical trial. Three products (such as hp518, etc.) are in the stage of ind application. Hp518 is expected to enter the clinical trial stage in 2021, and 4 products are in the preclinical research stage.

The research and development of innovative drugs generally needs to go through several stages, including new drug discovery stage, preclinical research stage, Ind application stage, clinical research stage, new drug marketing application (NDA) and post marketing research, and the R & D cycle usually takes 6 to 15 years.

At present, hc-1119, the core product with the fastest R & D progress, is only in phase III clinical trial stage. The company expects to submit NDA in China in 2022. According to this speed calculation, hc-1119 products of Haichuang Pharmaceutical Co., Ltd. will not contribute to the operating revenue until about 2024.

Haichuang pharmaceutical also said frankly that the results of preclinical research and preliminary clinical research could not fully predict the final results of clinical trials. Therefore, there is uncertainty whether major products such as hc-1119 and hp501 can pass the phase III clinical trial.

On the other hand, the main products of Haichuang Pharmaceutical Co., Ltd. are facing fierce market competition. According to the company, at present, AR inhibitors similar to hc-1119 have been approved for sale in China, and several similar drugs are in different clinical trial stages. After hc-1119 was approved for marketing, it will not only face direct competition with the above varieties, but also compete with generic drugs after the expiration of the original compound patent in the future.

Compared with hc-1119, the competitive advantages of listed products in market promotion, included in medical insurance, and doctors' medication habits may increase the difficulty of market competition faced by the company's products. In addition, if the clinical progress and approval progress of hc-1119 lags behind other competitive products, or the company cannot establish an effective commercial sales team or entrust a professional commercial team to sell, the sales revenue of hc-1119 may not meet the expectation, which will have adverse effects on the company's business, financial situation, operating performance and prospects.

It has been revealed that the compound patent of enzalumide, a competitive product of hc-1119, has been challenged by patent, and there may be a large number of nzalumide generic drugs. As early as October 2018, Shanghai fuxingtai, a subsidiary of Shanghai Fosun Pharmaceutical Co., Ltd., successfully challenged the invention patent of "diaryl hydantoin compound" of nzalumide. As of March 31, 2021, 4 domestic companies have applied for the generic drug of nzalumide soft capsules.

The compound patent of nzalumide will expire in China in 2026. If the patent holder of nzalumide cannot reject the patent invalidation declaration of the patent office through administrative litigation before the core product hc-1119 of Haichuang Pharmaceutical Co., Ltd. is listed, the company's products may face the competition with the generic medicine of nzalumide.

As generic drug prices are usually significantly lower than the original research drugs, such competition will affect the market share and pricing strategy of Haichuang pharmaceutical's core product hc-1119, which may have an adverse impact on the company's production and operation.

Hc-1119, the most promising core product of Haichuang Pharmaceutical Co., Ltd., has not yet come into the market. It has been faced with competition from competing products, price adjustment of medical insurance, generic drugs and other aspects. Whether the performance contribution can be realized as scheduled is greatly variable. However, there is no timetable for other products of the company.

According to the delisting rules of the science and technology innovation board, if the net profit of the listed company after deducting non-profit through audit is negative and the revenue is less than 100 million yuan, or the audited net assets are negative, the delisting condition will be triggered.

According to the current progress, if Haichuang Pharmaceutical Co., Ltd. is listed this year, it will still be unable to achieve revenue and other conditions in 2025, and the company may directly touch the termination criteria.

Institutional gambling on listing dividend

It is worth noting that although the products under development of Haichuang Pharmaceutical Co., Ltd. are faced with great commercial risks, they still do not stop the institutions from pursuing the company.

From April 2020, Haichuang pharmaceutical began to prepare to dismantle the red chip structure and return the control right to China. When the company quickly attracted a number of institutional investors.

In April 2020, when the currency of the registered capital of Haichuang pharmaceutical changed, hinova (HK) was still the only shareholder of the company.

In June of that year, hinova (HK) signed equity transfer agreements with 12 shareholders, including affinitis LLC, Haichuang Tongli, HISCO, Yingchuang power, hermed alpha, and Tianxi investment. Hinova (HK) transferred 100% equity of Haichuang Co., Ltd. (the predecessor of the company) to the above 12 shareholders respectively.

In August 2020, hermed alpha and Wuxi Shanyi will add 369600 yuan to Haichuang Co., Ltd. In August 2020, Shanghai Fosun, hermed alpha, Tianxi investment, Ningbo Lansheng, Xiamen Torch, Chengdu Peikun, Jiaxing Liding, Xiamen Haiyin, Guangfa Xinde and other institutions increased the capital of Haichuang Co., Ltd. by 11.8486 million yuan.

In September 2020, Shenzhen investment control, Wuhu Xinde, Shenzhen Guohai, Shenzhen Zhongke, Chengdu Gaotou, Hangzhou Tege, Chengdu Yingfei, Anhui Hezhuang, Jianyin Jinding, Jianyin capital and other entities increased capital by 9.5187 million yuan to Haichuang Co., Ltd.

In September 2020, Haichuang Co., Ltd. will be changed into a joint-stock company.

In September of that year, the company completed the fifth capital increase during the reporting period, with the registered capital increased from RMB 69.109 million to RMB 74.25 million, and the additional registered capital was subscribed by 11 private equity fund shareholders such as Zhuhai hanyao.

As of the signing date of the offering, all 60 shareholders of Haichuang pharmaceutical were new shareholders in the latest year, including 32 private fund shareholders.

According to the company's last capital increase price of 63.87 yuan / registered capital, the valuation of Haichuang pharmaceutical industry rapidly rose to 4.742 billion yuan. Therefore, the company chose the fifth set of standards of "expected market value no less than 4 billion yuan" on the science and technology innovation board.

Haichuang pharmaceutical, which is warmly welcomed by the capital, has not yet been listed, and its price per share has reached 63.87 yuan. Will market investors pay for the listing with unknown revenue? At present, a number of pharmaceutical listed companies have broken the market on the science and technology innovation board. How far can Haichuang pharmaceutical go in the domestic capital market?