Probe into the current situation of unprofitable pharmaceutical enterprises listed in Hong Kong

Before 2018, innovative drug companies have been facing a common pain point: financing is difficult According to statistics, it takes an average of 12 years for innovative drug varieties to go on the market from compound discovery, and the profit cycle is very long Usually, in the process of research and development, enterprises will be in a state of burning money, and the source of cash flow is no more than two modes: either relying on their own blood production or financing However, the reality is that: early innovative drug companies usually did not have product listing and lacked their own hematopoietic capacity; in terms of financing channels, A-shares and the new third board listing system with large financing scope have higher requirements on performance and are "not friendly" to innovative drug companies As the primary market equity financing is a non-public market, the scope and scale of financing objects are relatively limited, and the gap Communication costs a lot To a great extent, this hinders the pace of research and development of innovative drugs in China New policy of listing on Hong Kong stock exchange opens a new era of financing for unprofitable pharmaceutical and biological companies At the end of April 2018, the Hong Kong Stock Exchange launched the most significant listing reform in 25 years: the newly revised listing system of emerging and innovative industry companies was released, allowing biotechnology companies that failed to pass the main board financial qualification test to be listed with "B", and the door of public financing was opened to unprofitable biomedical companies for the first time! At that time, the policy news made a great impact in the biomedical circle, and innovative pharmaceutical companies responded quickly Geli pharmaceutical submitted the listing materials in May 2018, and was approved for IPO on August 1, 2018 Since then, a number of unprofitable biomedical enterprises have been listed in Hong Kong As of December 9, 2019, 12 enterprises have been successfully listed Figure 1: data sources of unprofitable pharmaceutical companies listed in Hong Kong as of December 9, 2019: Ifind, Zhongkang Industrial Capital Research Center Listed companies with "B" have a common financial feature: the R & D investment is not low relative to their own stage; and the net profit attributable to the parent company is in a loss state As of the half year of 2019, although some enterprises have already started listing their products (such as Junshi and Xinda), they have not yet seen the companies turning losses Figure 2 data sources of R & D and net profit of unprofitable companies listed in Hong Kong Stock Market: Ifind, the IPO of Zhongkang industrial capital research center has been broken, and some companies have been broken so far Perhaps because a series of national policies supporting innovative drugs were issued in 2018, and Hong Kong stocks opened their arms to unprofitable drug companies historically, there were four policy winds, so the market expectation for unprofitable drug companies was very optimistic at that time These "policy favourites" have also attracted the attention of many investors However, the unprofitable pharmaceutical enterprises are facing many difficulties, such as the long time of drug listing approval, the gradual increase of market competition with time, the short board of sales capacity, etc., especially for the companies that have not yet listed products, the ability of the company to commercialize the products is still unknown, and the listing risk is relatively high, making their investment risk relatively high It also takes a certain time for the secondary market to accept the non-profit enterprises Therefore, the stock price of Hong Kong stock non-profit pharmaceutical enterprises frequently breaks after listing A total of five companies broke their shares on the first day of listing Table 3: data sources of the first day of listing (subject to the closing price): Ifind, prospectus of each company, how much is the listing value of Zhongkang industrial capital research center? Obviously, the purpose of the policy dividend for unprofitable drug companies is to broaden the financing channels of innovative drug companies and to help the R & D and commercialization of new drug companies Now, more than a year after the opening of Hong Kong stock market, what are the performances of these listed unprofitable pharmaceutical companies? From the aspect of stock price, the fate of 12 listed companies is different On the one hand, the stock prices of enterprises represented by kangxinuo, Junshi biology and Xinda biology have increased or even doubled; on the other hand, with more and more Biopharmaceutical Enterprises Entering the competition, the scarcity advantages of some leading pharmaceutical enterprises have been weakened, resulting in the stock prices of seven companies still in a state of breaking Table 4 latest stock price break of the company (subject to closing price) source: tonghuashun Ifind, Zhongkang Industrial Capital Research Center The common characteristics of the three companies whose share price has risen since listing are that they have or will have products on the market: js-001, a PD-1 product of Junshi biology, has been on the market on December 17, 2018; citirimab, an ibi-308, a PD-1 product of Cinda biology, has been on the market on December 28, 2018; and the listing application of MCV4, a tetravalent meningococcal conjugate vaccine, has been accepted on November 22, 2019 The R & D pipeline of the three products has been or will be realized, so the market also gives them corresponding value The common feature of the seven companies is that they have not yet launched products and may face more fierce competition One of the important characteristics of new drug research and development is the long periodicity, which causes the problems related to Pharmacoeconomics: because the time of new drug research and development test, review and approval is usually long, there will inevitably be competitors during this period, and it is not ruled out that the later will catch up with the former, which makes the market competition pattern of this new drug change from the original leading style to the smoke of gunpowder In this way, the market will lose confidence in the prospect of new drugs and the acquisition of market share, which will affect the company's valuation, resulting in the continuous decline of stock price For example, Geli pharmaceutical, which broke out the most serious problem, has been in a low stock price since its listing On November 14, Geli pharmaceutical just announced the share buyback plan of 112 million shares, and its share price has been boosted; on November 28, it was hit by the failure of gonovi (danorevir sodium tablets), a leading product of hepatitis C, to medical insurance, and its share price "went back to before liberation overnight" Figure 5: source of stock price trend chart since Geli's listing: Ifind, from the perspective of product listing, Zhongkang Industrial Capital Research Center currently only announced listing of Junshi biology, PD-1 of Cinda biology and zebutini of Baiji Shenzhou, and other companies are still in the stage of no product listing In addition, the PD-1 of baiji is likely to be approved for listing by the end of 2019 Table 6 information source of listed products of unprofitable pharmaceutical companies in Hong Kong Stock: pharmaceutical companies of Zhongkang industrial capital research center without product listing have made different progress in clinical trials Figure 7 data source of partial clinical progress (incomplete statistics) of unprofitable pharmaceutical enterprises in Hong Kong Stock: it can be seen from Zhongkang industrial capital research center that pharmaceutical enterprises in the top time of listing have different degree of clinical progress after listing, and the steps of new drug research and development are steadily advancing With the continuous policy dividend, it is of pioneering significance in the financing history of unprofitable Biopharmaceutical Enterprises to support the opening of new drug R & D port exchange of domestic pharmaceutical enterprises In just over a year since the opening of the Hong Kong stock exchange, 12 domestic unprofitable biomedical enterprises have been successfully listed As of the publication date, Qiming medical has also successfully listed on the main board of Hong Kong Stock Exchange today (December 10), becoming the first unprofitable medical device listed company in Hong Kong stock market In addition, a number of "fresh blood" such as Corning Jerry, tisley biology, mengke medicine and Yongtai biology have also submitted IPO applications to the Hong Kong stock exchange, and the camp of unprofitable biomedical enterprises in Hong Kong stock market will continue to expand Following the pioneering measures of the Hong Kong stock exchange, under the top-level design of national senior leaders, the domestic SSE also launched the strategy of science and technology innovation board Among the five standards for listing, the fifth is closely related to the unprofitable pharmaceutical enterprises: the estimated market value is not less than 4 billion yuan; the main business or products need to be approved by the relevant departments of the state; the market space is large, and phased results have been achieved; the pharmaceutical industry enterprises need at least one core product to be approved to carry out phase II clinical trials The Shanghai Stock Exchange's move echoed the Hong Kong stock exchange, and innovative drug companies responded positively Zejing pharmaceutical and baiaotai are the first two enterprises to pass the meeting with the fifth set of standards In addition, among the more than 100 enterprises accepted by the science and technology innovation board, several biomedical enterprises, such as tianzhihang, cutting edge biology, Shenzhou cell, plan to adopt the fifth set of standards for listing Not only that, unprofitable pharmaceutical companies that have been listed are also planning to go public in many places to expand the financing circle: on December 3, 2019, Junshi biology's application for listing on science and technology innovation board was accepted, so Junshi biology is expected to change from "new three board + H" enterprise to "new three board + H + science and Technology Innovation Board" enterprise Similar to this is Baiji Shenzhou, which is currently an unprofitable pharmaceutical enterprise listed in "Mei + H" both at home and abroad Nowadays, the financing channels of innovative pharmaceutical enterprises have been greatly expanded, and the R & D strength of new drugs in China has been gradually demonstrated For example, recently, zebutini, a new anti-cancer drug independently developed by Baiji Shenzhou, was launched on the market, marking the "zero breakthrough" of innovative drugs in China It must be acknowledged that the new listing rules and Technology Innovation Board of Hong Kong stock offer a historic new opportunity for investment in the pharmaceutical industry China's strategic pace of "transforming from a big country of generic drugs to a big country of innovative drugs" is accelerating Original title: how are the unprofitable pharmaceutical companies going to Hong Kong?