Author Wang Yihan
Editor Liu Xiaoying
Yunnan Watson Biotechnology Company Limited (hereinafter referred to as Watson Biotechnology), in the biopharmaceutical market, is just like a prodigal son, and has not yet encountered the one worthy of settling down.
The recent "breakup drama" with subsidiary Shanghai Zerun Biotechnology Co.
The evening of December 4, Watson Biological issued nine announcements, the core content is the company will be 1.141 billion yuan of consideration, the transfer of 32.6% of the equity of Shanghai Zerun, while giving up the right of first refusal. If the transaction is completed, Watson biological shareholding will be reduced to 28.5%, no longer have control.
And at this point, from Shanghai Zerun handheld 2-valent HPV vaccine (cervical cancer vaccine) realized listed, only one step away. Investors were furious at the "cheap sale" of an important asset at such an important point in time. In a conference call with management over the weekend, they asked, "Do you think investors are fools? The company's business is not a business, but it is a business.
Management also offered the classic response: you can question our ability, but not our character.
Despite the hard-hitting reply, Watson Biological released an announcement early in the morning of the 7th, saying that the transaction proposal was canceled. But investors did not buy it, the day the company's shares fell directly, the market value evaporated 14 billion yuan.
The root of the conflict comes from the "insider control risk" of Watson Bio.
Watson Biologicals is a biopharmaceutical company mainly engaged in vaccine research and development, production and sales, was founded in 2001, and was listed on the GEM in 2010.
At the time of listing, Watson Biological head "future leading vaccine companies", "vaccine new money", "worthy of a lifetime collection of GEM operating companies" and other halo. But the following year, due to the company's participation in four vaccine projects, three failed, the company's share price cut. Since then the lack of explosive vaccine Watson Biological, in the capital market has become lukewarm.
Coupled with the increasingly fierce competition in the traditional vaccine market, the company's revenue and profit growth has gradually slowed down, and then due to the failure of the "big biological platform" strategy, from 2014 to 2018, the company's net profit after deductions for four consecutive years of losses.
But with the two heavyweight vaccines, 13-valent pneumonia polysaccharide conjugate vaccine (hereinafter referred to as "13-valent pneumonia vaccine") and HPV vaccine research and development progress, Watson Biologicals began to become active in the capital market, and finally broke out in the first half of this year.
2020 April, Watson biological 13-valent pneumonia vaccine on the market sales, alone in the second quarter for the company to bring 112 million yuan of operating income, accounting for 20% of the revenue in the current period. mid-June, the bivalent HPV vaccine declared the production and access to the "acceptance of notice", which means that the vaccine from the sale of the vaccine, only one step away. At the same time, the nine-valent HPV vaccine in research has also entered the clinical trial stage.
The good news has sent the company's stock price rocketing upward. on August 5, Watson Biological hit its highest closing price ever of 91.8 yuan, three times as much as it did at the beginning of the year. The company's total market capitalization of more than 140 billion yuan, in the A-share 69 biomedical companies, ranked fifth. Although with 573 million yuan of operating income in the first half of the year, Watson Biological can only be ranked 33rd.
As of the end of September, the number of shareholders of Watson Biologicals was 119,400, up 55,400 from the end of June, a quarterly increase of up to 87%.
But unlike the enthusiastic influx of investors, Watson Bio's major shareholders and executives are reducing their holdings and leaving the company.
In late June, the company's chairman, Li Yunchun, reduced his holdings by 16,088,800 shares, with a reference market value of more than 800 million yuan. The second largest shareholder, Liu Junhui, since July, reduced his holdings by 11,470,300 shares, with a reference market value of 496 million yuan.
According to Choice data statistics, in the past two years, the company's top ten shareholders combined to reduce the reference market value of 2.7 billion yuan, is more than 3.5 times the net profit for the same period. And Watson Biological senior replacement is also very frequent, the company's top management left 6 people in 2019 and 5 people in 2020.
It is worth recalling that Liu Junhui also participated in the first half of the year in one of the competitors of Watson Biologicals, Kangtai Biologicals nearly 3 billion yuan of non-public stock offering, subscribed to nearly 300 million yuan of shares.
As a company listed for ten years, Watson Biological has been in the state of no real controller. Not only that, as of the end of September this year, Watson Biological even shareholding ratio of more than 5% of the controlling shareholders are not, the equity is extremely decentralized.
The first major shareholder, Yunnan Province Industrial Investment Holding Group, holds 4.97%. The chairman of the board, Li Yunchun, although serving more than 13 years, but the proportion of shares has just listed 15.05% down to 3.13%, ranking fourth in the top ten shareholders.
Zhang Huaxin, director of the Department of corporate restructuring and reorganization, said to the city sector, equity dispersion has both advantages and disadvantages, the advantage is that it will reduce the majority of shareholders to infringe on the rights and interests of minority shareholders, the disadvantage is that too much dispersion of equity will lead to shareholders to resolve the efficiency of the major issues, and there will be the risk of "insider control".
The so-called "insider control" is due to the inconsistency between the interests of shareholders and management, resulting in the management taking advantage of the information to directly or indirectly encroach on the interests of shareholders.
Although we can't judge Watson Biologicals as having "insider control" because of its dispersed shareholding, the company's performance has been unsatisfactory since it was listed. For this reason, Watson Biological in 2018 and 2020 to launch a two-phase equity incentive program, the interests of executives and the company's performance is bundled.
The two-phase equity incentive targets include core management and backbone of at least 163 people, with a total of 149.1 million stock option shares and a total reference price of 7.358 billion yuan. Among them, the company's chairman Li Yunchun, vice chairman Huang Zhen, president Jiang Runsheng and vice president Zhang Jiankang, a total of 28.4 million shares of stock options granted, accounting for 19%.
Such a generous equity incentive also corresponds to a high standard of performance assessment. Take the 2018 equity incentive as an example, the first exercise of the performance appraisal period for 2018 and 2019, the performance index requires two years of cumulative net profit of not less than 1 billion yuan. And so on, to the last exercise period, the two-year cumulative net profit requirement is not less than 2.7 billion yuan.
In the face of enormous performance pressure, Watson biological net profit after deduction appears weak and helpless. But two "strange" transactions, but let things have a turnaround.
In 2012 and 2013, Watson acquired Shanghai Zerun and Jiahe Biopharmaceutical Co. The former's products under development include HPV vaccines, while the latter holds four major monoclonal antibody drug varieties.
After five years of investment support and incubation cultivation, Jiahe Biological development momentum is rapid, clinical trial approvals for products, from one to nine, and a number of varieties into the clinical phase Ⅲ stage, the distance from the product on the market is just around the corner.
But just when things were looking up, Watson Biotech sold Jiahe Biotech.
At that time, the reason given by Watson Biologicals was that the domestic monoclonal antibody had become a hot spot, but the competition in the industry had intensified, posing a greater challenge to the company's future operating results and cash flow. In order to focus more on the research and development of 13-valent pneumonia vaccine and HPV vaccine, the company decided to transfer the equity of Jiahe Bio and no longer included in the scope of consolidation.
In 2018, Watson Biological transferred 46.45% of the equity of Jiahe Biologicals and gained 1.176 billion yuan of investment income, not only that year's net profit turned from a loss to a profit, but also incidentally fulfilled the aforementioned 1 billion yuan in the 2018 and 2019 equity incentive performance requirements.
After the transfer of shares, Jiahe Biological's largest shareholder is HH CT Holdings Limited (hereinafter referred to as HH CT), whose ultimate source of funding is Gao Tiling Capital. Meanwhile, the other shareholder is the industry's most researched and highest revenue clinical CRO (pharmaceutical research and development contract outsourcing services organization) leader, Tiger Pharma's fund.
It is worth noting that Watson Bio's chairman, Li Yunchun, is also a former director of JHBP (CY) Holdings Limited, the sole shareholder of HH CT.
Subsequently, under the supportive packaging of High Tier Capital and Tiger Pharmaceuticals, JHBP, which had accumulated a loss of 261 million yuan in five years in the hands of Watson Biologicals, was listed on the Hong Kong stock market in October this year. The first day of listing once surged more than 30%, the market value of up to 15.8 billion Hong Kong dollars. Compared to the valuation of 3.47 billion yuan at the time of transfer, Jiahe Biological is really "cheap". And his brother, Shanghai Zerun, is about to face a similar fate.
On the evening of December 4, the announcement showed that Watson Biological intention to 1.141 billion yuan of consideration, the transfer of 32.6% of the equity of Shanghai Zerun. This time, "old acquaintances" appeared again.
According to the announcement, The largest buyer of this transaction is Zibo Yunze, equity penetration, the major shareholder behind it is Tiger Pharmaceuticals. And Gao Tile Capital did not participate in this acquisition, the company last year capital increase when one of the buyers of Gao Tile Chu Ying, is its affiliated investment platform.
"Iron Triangle" together again, investors seem to see the same recipe, smell the same flavor.
It is worth noting that Watson Biological from the equity incentives in the 2019 to 2020 performance assessment is only the last three months, but there is still 465 million yuan of net profit shortfall, so that the pressure on its performance in the fourth quarter soared.
Once this Shanghai Zerun equity transfer before the end of the year is successful, Watson Biological is expected to generate a net profit of about 1.18 billion yuan to 1.28 billion yuan. In this way, not only can easily complete this period of performance requirements, but also the next performance assessment, at least 50% completed.
If the future of Shanghai Zerun also embarked on the same path of listing with Jiahe Biological, it is not difficult to understand why Watson biological must be sold. After all, the sale of a hand, can enjoy the current investment income, but also can be exempted from the large amount of R & D investment, the future once the listing is successful, but also can make a profit, can be called "a fish three eat".
It's no wonder that investors want to compare the market value of Shanghai Zerun with that of Wantai Biologicals, the pharmaceutical newcomer that also holds a bivalent HPV vaccine. After all, compared with the current market capitalization of more than 80 billion yuan, the valuation of 3.5 billion yuan of Shanghai Zerun is absolutely "cabbage price".
A buy and sell, is Watson biological executives and the power of capital carnival, but with many investors have nothing to do.
The lack of a backbone of Watson Biologicals, in the biomedical market is like a prodigal son, never met the person worthy of his stability.
I thought Jiahe Bio could tie up the heart of Watson Biologicals, but I didn't expect a Shanghai Zerun to come out in the middle of the road. Now, in order to the new favorite "Abbott Bio", the old love Shanghai Zerun also have to face the situation of being broken up at any time. But Watson Biological this time the desperate to succeed, but full of unknown.
In May of this year, Watson Biologicals and Suzhou Abbott Bio-technology Limited (hereinafter referred to as "Abbott Biologicals") cooperation, *** with the development of a new type of coronavirus mRNA vaccine, herpes zoster mRNA vaccine. Both vaccines are developed by Able Bio and commercialized by Watson Biotechnology in the later stages of production.
Currently, 13 vaccines have entered clinical trials in China, of which, 4 vaccines have entered phase III clinical trials. In contrast, Watson Biologicals' new Crown vaccine is still in Phase I clinical trials. The betting on this lost opportunity vaccine is still full of variables.
And another herpes zoster mRNA vaccine, has a high technical risk. mRNA vaccine from the time to apply for clinical, whether to obtain clinical trial approval, whether the clinical trial can be successful, whether to obtain the approval of drug registration, there are greater uncertainty.
Obviously, investors do not want to pay for uncertainty. This also directly led to the company's stock price plummeted 20% on December 7, market value evaporated 14.092 billion yuan.
On the same day, the company's chairman Li Yunchun said in an interview with CCTV finance channel, "It is very unfortunate that the project was launched without the understanding of some investors, on the one hand, our communication is not in place, on the other hand, we as a business operator itself, the company's medium- and long-term interests and investors in the short-term interests of a certain amount of disagreement and conflict. "
In the capital market, trust and understanding are built on the basis of the same interests. If for the so-called "company's medium and long-term interests", and leave investors a chicken feather, trust will eventually collapse. After this incident, left Watson biological credit line, has not much.