Deqi medicine in the past three years accumulated losses of more than 1 billion yuan, but market analysis is expected to be listed on the company's valuation is expected to be more than 10 billion. Investors can't help but ask: Where will it go on the biomedical track where all kinds of capitals are competing?
"Investor Network" Liu Hao Hua
November 9, has passed the Hong Kong Stock Exchange hearing of the Deqi Pharmaceutical Company Limited (hereinafter referred to as "Deqi Pharmaceutical") to start the public offering, intends to issue 154.2 million global H shares, the issue price range of 15.8 to 18.08 Hong Kong dollars, the stock code is 06996.HK, is expected to be listed on November 20th.
According to the report, Deqi Pharma is a clinical-stage biopharmaceutical company focused on innovative anti-tumor drugs, and the company's uniqueness stems from its industry-leading research and development capabilities, as well as its differentiated strategic approach to developing new anti-tumor therapies.
Although Deqi Pharma has begun prospecting, the company is currently in a state of sustained R&D investment and has yet to launch a marketable product, making commercialization the company's most pressing issue.
In response to the progress of the listing of Deqi Pharmaceutical, the use of funds and the subsequent development of the issue, "investor network" wrote to the company's secretary, but has not been the other side of the reply.
Biomedicine has become a hot capital "meat and potatoes"
In terms of business attributes, the bio-innovative drug research and development industry belongs to the Deqi medicine is a "high-yield, high-risk". Therefore, most of the bio-innovation drug research and development companies are in the red before they go to market.
Like the biopharmaceutical companies that have applied for listing on the Hong Kong Stock Exchange and Mainland China's Science and Technology Innovation Board in the past two years, Deqi Pharma has not generated any profits, and has accumulated losses of more than 1 billion yuan in the past three years.
According to the prospectus, in 2018, 2019 and the first half of 2020, Deqi Pharma's revenues were RMB 9,464,000, RMB 52,946,000 and RMB 19,366,000, respectively; the corresponding net losses were RMB 146 million, RMB 324 million and RMB 538 million, respectively. Of this amount, research and development expenses amounted to RMB116 million, RMB116 million and RMB170 million, respectively.
Huang Lingyi, executive general manager of the investment banking department of Guoxin Securities, told Investors.com, "In the capital market, people are more interested in the track chosen by the biopharmaceutical company, its R&D and technological capabilities, and its future growth space, rather than whether it is profitable now."
It is reported that since the Hong Kong Stock Exchange introduced Chapter 18A in 2018, allowing biotechnology companies without revenue to be listed. As of the end of September this year, the Hong Kong Stock Exchange has welcomed 21 healthcare companies that meet the requirements of Chapter 18A to list in Hong Kong, raising HK$53.6 billion.
And the mainland A-share KIC is no less, since the opening of the KIC in 2019, as of October 30, 2020, *** there are 185 KIC companies listed, of which, pharmaceutical and biological companies a *** there are 38, raising $48.44 billion, the industry's total market capitalization is 807.02 billion yuan, pharmaceutical and biological plate in the KIC occupies 23% of the market capitalization .
"From the point of view of capital, pharmaceutical and biological have high investment properties. Pharmaceutical industry valuation at the beginning of the year is about 35 times PE, as of the end of October raised to 47 times." Du Xiangyang, chief analyst of Southwest Securities Pharmaceutical and Biological Group, told InvestorPlace.com that from the perspective of supply and demand, the growth of the prevalence of chronic diseases brought about by the aging population and the continued growth of medical expenditures have also brought more market space for the pharmaceutical and biological industries.
According to Southwest Securities wrote the "pharmaceutical industry 2021 investment strategy:" double cycle "background," "innovation and upgrading + import substitution" to lead the pharmaceutical era "analysis report shows that from 2003-2013, the prevalence of chronic disease The report shows that from 2003 to 2013, the prevalence of chronic diseases has increased by a factor of one.
This report says, "On the supply side, we can see that the status of medicine is constantly improving, and health care expenditure is also growing, from the point of view of China's medical expenditure in the ratio of GDP, has grown from 4.9% in 2003 to 6.6% in 2019. And from the world's perspective, the proportion of developed countries is currently around 13%."
Lingyi Huang added: "Previously, the companies I came across applying for IPOs were more of the traditional type, whereas most of the ones applying for IPOs in the past two to three years are biopharmaceutical companies."
Multiple capital support to promote the company's valuation of tens of billions of ranks
Capital in the end how much favor biomedical enterprises? From the body of Deqi medicine can be seen.
According to the Deqi Medicine prospectus and public information, in April 2017, the world's top 500 listed companies in the United States, the United States, the new base (Celgene) shares in Deqi Medicine;
In August 2017, Deqi Medicine completed the 21 million U.S. dollars of A round of financing by Brilliance Capital, Qiming Venture Capital, Taifu Capital, TIGER INVESTMENT **** with the participation of investment;
In January 2019, Deqi Pharma obtained USD 120 million Series B financing led by Banyu Capital and Fangyuan Capital, with the participation of Xinji, WuXi Kangde, Qiming Venture Capital, Taikang Capital, and Taifu Capital;
In July this year, Deqi Pharma completed USD 97 million Series C financing led by Fidelity Investments, which also introduced two institutional endorsements by Gao Tiles Venture Capital and GIC Corporation, with the participation of veteran shareholders Qiming Venture Capital, Boyu Capital continued to invest;
In other words, before it was even listed, Deqi Pharma raised nearly $260 million for research and development and daily operations.
It is reported that the issue of the Deqi Pharmaceutical and the introduction of 10 cornerstone investors, including Fidelity Investments, GIC Government of Singapore Investment Corporation, BlackRock, Banyu Capital, Gao Tiling Capital, Sequoia Capital, and other cornerstone investors, a total of *** subscription of about $ 179 million equivalent shares, the mid-price of the issue of the shares of the offering of 53.25%, with a six-month lock-up period.
With the support of capital, the valuation of Deqi Pharma is expected to be among the tens of billions after listing.
According to the latest report released by Anxin Securities, from the valuation point of view, Deqi Pharma can be compared to the Hong Kong stock also in-depth layout of hematoma and solid tumor biopharmaceutical company Nuocheng Jianhua (09969.HK, market value of 15.2 billion). In the independent research and development capabilities and product progress, Nuocheng Jianhua to be slightly better than Deqi Pharmaceutical, but taking into account Deqi Pharmaceutical to introduce the core product is the only drug of its kind, the current competitive landscape is good, and in the large indications of non-small-cell lung cancer on the layout, so that the company's reasonable market capitalization and Nuocheng Jianhua close to the $ 15 billion Hong Kong dollars or so, the short-term existence of about 20% of the upside space.
Du Xiangyang said, due to the epidemic and liquidity of the two core factors, year-to-date Shenwan Pharmaceutical Index rose 48.2%, outperforming the CSI 300 index of about 32.5 percentage points of the industry ranked fourth.
The rugged road ahead for product commercialization
With capital support, it is particularly important to know whether Deqi Medicine can achieve commercialization.
The prospectus shows that Deqi Pharma has built a highly selective pipeline of 12 assets, including two late-stage clinical assets, four early-stage clinical assets and six preclinical assets. There are also nine ongoing clinical trials and five planned clinical trial launches.
Its core products are ATG-010 and ATG-008, licensed from Karyopharm and Celgene, respectively. Among them, ATG-010 (selinexor) is the world's first selective inhibitor of nuclear export (SINE) for the treatment of refractory relapsed multiple myeloma, and is the world's first oral anticancer drug for SINE. ATG-008 is a potential first-in-class product for the treatment of hepatocellular carcinoma and non-small cell lung cancer, among others.
Hulan Indigo, a professor at the Shanghai Institutes for Life Sciences of the Chinese Academy of Sciences, told InvestorPlace, "The threshold for approval is relatively low in oncology treatments due to the lack of drugs that are effective treatments. New drugs specifically to look at the proportion of effective population or for a certain type of population with special effects."
According to Frost & Sullivan, there were already 101,900 patients with multiple myeloma in China in 2019, which is estimated to grow at a CAGR of 10.4% to 167,200 in 2024, with the market estimated to reach CNY14.7 billion in the same year. The DLBCL market in China is also expected to grow rapidly, with 199,100 DLBCL patients in 2019, estimated to grow at a CAGR of 4.7% to 250,050 by 2024, and the market size estimated to reach RMB 18.6 billion in 2024.
Hulan Indigo also said that entering the clinical trial stage of a new drug is only the first step, and there is a need to continue to invest in R&D.
Hulan Indigo also said that the new drug is only the first step.
In the prospectus, Deqi Pharma said, "RMB 550 million of the RMB 1 billion in funds raised will be used for the second phase of the construction of the production base, for the expansion of the production capacity of MCV2 vaccine and MCV4 vaccine."
"From the policy level, the state is strongly supportive of the launch of innovative drugs and their commercialization." Du Xiangyang told InvestorPlace.com that the "Interim Measures for the Administration of Basic Medical Insurance Drugs (Draft)" introduced this year further clarifies the direction of subtraction in the "cage for birds" strategy. Through the transfer of varieties to reduce health insurance expenditure, for clinically necessary drugs, innovative drugs, etc. to make room for entry. At the same time, the provisions of the annual dynamic adjustment, as well as innovative drugs, health insurance access negotiations, can accelerate the speed of innovative drugs into the health insurance, to promote the new year volume.
It is reported that the ATG-010 product of Deqi Pharmaceutical is expected to submit a listing application for the third-line treatment of multiple myeloma in China at the end of this year or the first quarter of next year at the earliest. Based on the special characteristics of the research and development of new drug industry, the capital market for biopharmaceuticals is very chasing. In the past 2 years, under the support of capital, listed biopharmaceutical companies have received good market feedback on their stock prices. But for an enterprise, capital operation can only bring short-term gains, the commercialization of the product in order to make the enterprise lasting development. From the data that Deqi Pharma has already disclosed, there is still a long way to go to realize the commercialization of its products. （