 Home > Active Ingredient News > Drugs Articles > There are 0 US stocks, few Hong Kong stocks, A-shares have plummeted by half, and the IPOs of biopharmaceutical companies have gone from breaking to "not being issued", when will it bottom? 2022 IPO summary and outlook

There are 0 US stocks, few Hong Kong stocks, A-shares have plummeted by half, and the IPOs of biopharmaceutical companies have gone from breaking to "not being issued", when will it bottom? 2022 IPO summary and outlook

 Last Update: 2022-11-26
 Source: Internet
 Author: User

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Major exit channels are nearing closure, global IPOs have set a record low in nearly a decade, and it is difficult for the Hong Kong Stock Exchange to issue an IPO.

Even if it is issued, the serious valuation inversion in the primary and secondary markets will make the primary market investors more than they lose
.

"I wish it was the bottom line
.
" Tan Siyou, who has been investing in biopharmaceuticals in the open market, is slightly embarrassed
.

Last year, also in early winter, Tan Siyou said with some indignation in an interview, "The public market in 2021 is full of IPOs that no one wants, and many companies are going public
at very high valuations.
" At the time, he hoped that the number of new companies going public in 2022 would be lower
than in 2021.

"But this year it did drop more than expected," Tan Siyou sighed
.

This is the true capital market portrayal
of most biomedical investors in 2022.

01 Walk to extreme cold

Cold, really cold, all the interviewed investors tacitly agreed
.
"This year will be the coldest in the pharmaceutical industry in the last decade
.
" Song Gaoguang, partner of Northern Light Venture Capital, said
.

In the past year, there has been a near-panic scene in the medical venture capital space
.
From the second half of 2021 to March and April 2022, many investment institutions in the market began to invest in very early projects, angel round, pre-A round, everyone generally felt that the valuation in the later stage was too high, and the market's response to early projects was relatively slow
.

"Most investment institutions have no chance to exit this year, especially those in the later stage
.
" Song Gaoguang said frankly, "Because the most important exit channels are close to closure, it is difficult for the Hong Kong Stock Exchange to issue an IPO, and even if it is issued, the serious valuation inversion in the primary and secondary markets will make investors in the primary market more than worth the loss, and there are many lessons
from the past.
" ”

This is the state of the capital market in the eyes of a leading institutional investor, and it can be imagined by extrapolating it to the entire industry
.

The data is even more "killing intent"
.
According to the statistics of E drug manager Rong Media, from October 1, 2021 ~ September 30, 2022, 23 Chinese biopharmaceutical companies completed IPOs, more than
half of last year's 59.
Among them, only one company is listed on NASDAQ, only 5 are listed on the Hong Kong Stock Exchange (up from 14 last year), and 13 are listed on the Science and Technology Innovation Capital (23 last year).

In fact, if only 2022 to date, the only biopharmaceutical companies listed on the Hong Kong Stock Exchange are Lepu Biotech and Biocytogen
.
Hong Kong stocks appear to be performing worse than A-shares, "Hong Kong-listed pharmaceutical companies are generally better than A-shares, but their core products are at a relatively earlier stage and relatively
riskier.
" Liu Dan, senior partner in charge of innovation investment at CDH Investment, analyzed
.
When the capital market situation deteriorates, investors' risk appetite changes, and the target with relatively high risk may be undersubscribed, which will lead to the failure
of IPO issuance.

In the cold winter, not only domestic biomedicine, Europe and the United States are even more difficult
.
"Most early-stage projects in the U.
S.
are out of money, except for
a few well-known scientists.
" Jiang Qiao, a Chinese who has been engaged in medical investment in the United States for a long time, said
.

According to IPO specialist Renaissance Capital, the second quarter of this year is the case for all industries since 2009 In the slowest three months of U.
S.
IPOs, only three biotech companies "managed to escape" to go public
.
Meanwhile, the median size of fundraising shrank to $22 million, the lowest level in a decade
.
The same was true in China, where only one IPO was completed
in the quarter.

The third quarter did not improve, or even got worse
.
According to Evaluate According to Vantage, the number of issuers in the third quarter was unchanged from the previous quarter, but the total amount raised plunged again to $153 million, down more than 50%
sequentially.

The situation on the European continent is worse
than in the United States.
It is understood that as of the end of the third quarter, there have been no biopharmaceutical company listings
in Europe since Aelis Farma entered Euronext in February.

In the depressed IPO scenario, small transactions have become one of
the most striking features.
Evaluate According to Vantage, the average amount raised by U.
S.
stocks plummeted to $79 million, reaching $142 million last year and $167 million
in 2020.
In terms of A-shares, according to the statistics of E drug managers, the median financing amount of A-shares fell to 1.
8 billion yuan, while that of Hong Kong stocks fell to HK$
680 million.
The average book return of institutions has also gradually decreased to 4 times and continues to decline, with Hong Kong stocks still below this figure
.

Even more difficult, even if the biotechs behind these small transactions raised funds through IPOs, they still have little to save the company's normal operations
.
According to foreign media reports, 6 of the 8 Biotechs that raised less than $50 million in initial public offerings this year have gone bankrupt
.

In contrast, although many domestic biotechs have exposed the news of selling pipelines, factories and layoffs this year, they have not yet reached the point of exhaustion in terms of cash reserves
.

It can be seen that although the listing conditions of the US capital market for biotechnology companies are relatively relaxed, the trial and elimination of the public market are more stringent
.
From the data point of view, so far in 2022, not a single Chinese biotech company has listed
in the United States.
"The future listing of Chinese concept stocks in the United States is not much expected, it will take a while to digest and find new alternative channels, but neither Hong Kong stocks nor the Singapore Exchange can fully undertake it
.
" In the future, it will be scattered in several capital markets, and it is not ruled out that the domestic capital market will be further liberalized to digest the listing needs
of excellent enterprises.
Liu Dan told
E drug manager Rong Media.

For the Biotechs behind the big deals, their goal is to hold the issue price
.
Since 2021, "breakout" has become the new normal in the secondary market of the biopharmaceutical industry, according to statistics, of the more than 300 Biotechs listed in the past five years, about 80% of the companies fell below the issue price at the end of the year, and even dozens of companies have broken net (stock prices fell below net asset value).

Unfortunately, most companies break within days or months of going public; Thankfully, some companies were able to recover and achieve excellent performance, such as doubling
their share prices.

"Some companies are injured by mistake, the proportion may be 10%~20%, the number is my virtual; But most corporate prices do diverge from value
.
Song Gaoguang said
to E drug manager Rong Media.

02 Good projects and bad projects

Behind these companies holding on to the offering price is a trend
of capital.
On the one hand, unbroken new companies gradually reduce their valuations, bringing them closer to investors' expectations
.
On the other hand, reflecting the preference of capital, in 2022, which companies are investors paying attention to, and which companies are being abandoned by capital?

After the research of E drug managers and media, it was found that these most favored companies have several common explicit characteristics in addition to their core strength, such as "they are product-oriented companies rather than platform companies", "core products are in clinical phase II and beyond", "high-end, complex preparation technology", etc.
, among which the European and American markets are slightly different
from the Chinese market.

Biotechnology research company Bay Bridge A recent analysis by Bio also found that stock market performance is reversing, shifting from platform companies to biotech companies
that are more focused on specific products.
Platform companies have been a big bit of excitement in the stock market over the past few years, especially mRNA platforms, with the best-known COVID vaccine makers Moderna and BioNTech, which have been a bit bad
lately.
According to statistics, among the more than 500 biotechnology companies listed since 2010, 7 of the top 10 underperforming companies are platform companies
.

Flagship, a founding investor in Moderna Pioneering acknowledged the shift, saying that "the trend is very clear, and it's a way
for investors to express a higher degree of risk aversion.
" ”

The idea of platform companies is to ensure that the fate of the company has nothing to do with the success or failure of a single drug, which is supposed to be a business model for spreading risk, and entrepreneurs need a platform to build a lasting company
in the long run.
However, the paradox that building platform companies is expensive and time-consuming, and that pharmaceutical companies have a hard time funding pure platforms, and they will only pay for low-risk, valuable products, is a long-standing paradox
.

"When the capital market was crazy, venture capital institutions released water, which spawned a number of platform companies to enter the public market, and most of the net present value of these platforms was less than 0
.
When the bubble burst, this group of companies naturally bore the brunt
.
Jiang Qiao said
.

Instead, favored companies are basically product companies
with de-risked assets (approved products or products in critical research).
According to the study, 32 of the more than 500 biotech startups were acquired
for more than $1 billion.
Of these acquired companies, 40% have approved products, 31% have submitted or are about to submit regulatory documents for approval, and 25% are conducting critical research
.

The three best-performing biotech IPOs in the U.
S.
this year all follow this logic
exactly.
For example, this year's "price king" Belite Bio, which went public on April 29, has risen more than 360%
since then.
The core product, LBS-008, has initiated the third phase of Stargardt's disease, a genetic juvenile macular degeneration, and expects to initiate its third stage
of age-related dry macular degeneration in 2022.
Furthermore, LBS-008 has received orphan drug designation in the United States and Europe, and rare pediatric disease (RPD) designation and fast-track designation
in the United States.

CinCor was the second highest gainer Pharma, which went public on Jan.
7, has risen nearly 90 percent
since then.
Its primary clinical candidate, Baxdrostat, for the treatment of hypertension, has completed a Phase II clinical trial and reported positive results, with other indications undergoing pivotal clinical trials
.

Aelis Farma, the only seed in the European market, has similar characteristics, with the core product, a new molecular entity used to treat excessive cannabis use, already in Phase 2b clinical trials
in the United States.

The domestic situation is slightly different
.
Most investors believe that there are fewer biotechnology opportunities at this stage, the market prefers to shift upstream key components and advanced manufacturing, and the pharmaceutical track also pays more attention to high-certainty directions
such as high-end and complex preparations.

Taking Biotech, which completed its IPO in 2022, as an example, the top five pharmaceutical companies in terms of fundraising were Mabwell, InnoCare, Remegen, Yahong Pharma and Yifang Biologics, and the five Biotechs raised similar amounts, with the largest Mabwell raising 3.
477 billion yuan, the least Yifang Biologics raising 2.
084 billion yuan, and the remaining three exceeding 2.
5 billion yuan
.

Overall, the most notable feature of the five biotechs is that they all have de-risked assets, either the product is marketed and sold, the core product is in a critical phase III clinical trial, or both
.

But even if it is favored by investors when raising funds, it may end differently
after reaching the secondary market.
Some of them are like riding the east wind and soaring after listing, InnoCare is the same, and Rongchang Biotechnology is the same; Some are on a roller coaster and strive to maintain the issue price, as is the case with Yifang Bio; Some listings are the peak, and they will never return, as is the case with Mabwell and as with Yahong Pharmaceutical
.

What exactly is the problem? "In the pharmaceutical industry, sales barriers are sometimes much larger than R&D barriers
.
In the past, the primary and secondary markets did not have enough understanding of commercialization capabilities and gave weight, which means that even if Biotech's drugs are approved for marketing, there is still a high chance that they will not be sold
.
PD-1 is a typical example, and there is a large
differentiation between enterprises.
More and more investors are now recognizing the problem and adjusting their valuation metrics
.
Song Gaoguang analyzed
.

Taking Mabwell as an example, the core pipeline mainly covered four biosimilars at the time of listing, of which adalimumab biosimilars have been marketed as the sixth domestic company, and the biosimilars of denosumab and denosumab are in key phase III clinical trials; Most of the remaining innovative products are in the early stages
.
Since its listing, Mabwell's share price has halved, and its market value has fallen from more than 12 billion yuan to about 6 billion yuan
.
Is the secondary market wrong? Comparing the market capitalization of Henlius, a leading biosimilar listed in Hong Kong stocks, at the end of October (about 6 billion yuan), the answer is clear
.

InnoCare, the rising company, has risen nearly 40% since its listing on the Science and Technology Innovation Board on September 21, with a market value of more than 26 billion yuan
.
Why is it favored? On the one hand, InnoCare has established a platform pipeline with products, and when the science and technology innovation board was listed, its core product orelabrutinib had been approved for two indications, two indications for the NDA stage, and as many as five indications for registrational clinical trials.
In addition, its CD19 monoclonal antibody has also entered the registration clinic, and a number of products have entered the second
clinical phase.
On the other hand, InnoCare has initially demonstrated commercialization capabilities after the approval of its products, and the sales revenue of orelabrutinib in the first half of this year was 217 million yuan, compared with the domestic sales of 500 million yuan of zebratinib, as the second domestic BTK inhibitor performance is acceptable
.

Coincidentally, the stock price of the rising Remegen Biologics has risen by more than 80% since its listing, with a market value of about 45 billion yuan
.
Behind the favor, what is the background of Rongchang Biotechnology? The first is the platform pipeline with valuable products, because without valuable products, the platform produces almost no value
.
At the time of listing, Remegen had two commercial products, Tatacept and vedicitumab, as well as a number of critical Phase III clinical trials and more than ten Phase II clinical trials
.
At the same time, the commercialization potential has initially appeared, and its product sales reached 329 million yuan in the first half of this year, which is remarkable for companies that have just been commercialized for one year
.

03 The New Normal and the Dawn

When global markets tend to be low-risk, will real innovation be hindered? When will IPOs return to normal? One question after another, investors need to answer it
urgently.

The investors interviewed agreed that real innovation may be affected by cyclical and temporary effects, but not really hindered
.

"In the process of capital catalysis, everyone will become dizzy and rush forward, so they will inevitably experience the process of trough to trough and then trough crest, but this process is the process
of value gradually returning to rationality.
Take healthcare investment itself as an example, this is a high-barrier industry, when more than 3,000 institutions influx, industry investment seems to have no barriers, it will also make the entire industry go to a rapid downward state
.
This does not mean that more people is not a good phenomenon, more people symbolizes the prosperity of the industry, but behind the prosperity can be a great trap
.
Song Gaoguang told E drug manager Rong Media that it is under this kind of support that more and more professional investors will move to an earlier stage, and real innovation will usher in the dawn
.

However, the valuation correction will continue for some time
.
All investors surveyed agreed that it would be difficult to see a big change
in this year.
The IPO market in all industries is dead
.

"At least one to two years
of baptism.
" Song Gaoguang said
bluntly.

The reason why it is difficult to recover is not the reduction of the resources of the IPO target, but the mood and timing
.
The data shows that more than 75 pharmaceutical companies planned IPOs on the Nasdaq market at the end of the first quarter; During the same period, 23 unprofitable biotech companies submitted listing applications in Hong Kong stocks, all of which were waiting for the right time
to list.
However, during the long waiting process, some prospectuses were abandoned after they expired, while others voluntarily withdrew their applications
.

In this regard, Liu Dan said that the mood and the time have not come, due to the continuous decline of the secondary market, the industry has formed a panic about the IPO, which has greatly affected the issuance
of subsequent IPOs.

Interestingly, biomedical investment circles have begun to regard flatness as the rising new normal.

However, there are also some views that biotechnology needs fewer companies, not more, to regain its footing
.
Mizuho Securities analysts believe that between a quarter and one-third of publicly traded biotech companies need to "disappear" through delistings, reverse mergers or acquisitions before the biotech industry reaches a "normalized base level
.
"

Walk to the dark, where is the dawn? Song Gaoguang said, "This necessary stage will inevitably be painful, but everyone is returning and investing
according to the standard of being able to go public.
" Believe that spring will come and spring is not far away
.
”

HKEX has already taken action
.
On October 19, the Hong Kong Stock Exchange issued a consultation paper proposing to expand Hong Kong's existing listing regime to allow specialised technology companies to list
in Hong Kong.
It was previously reported that the Hong Kong Stock Exchange is planning a new 18C charter plan to lower the revenue threshold
of large technology companies in artificial intelligence, new materials, chips and other fields.
Although this document does not come from the biotech sector, the loose policy may trigger a positive ripple reaction
.

Note: It is reported that Crown Medbo will complete its business combination with Maxpro in the first quarter of 2023, land on NASDAQ through a SPAC under the ticker symbol "APLM", and plan to raise $105 million
.
This article does not cover such businesses
.

(Tan Siyou and Jiang Qiao are pseudonyms in the text)

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