Text/ Ling Xin
Editor / Wang Xiao
Photo/pixabay
12 unprofitable pharmaceutical companies listed on the Science and Technology Innovation Board, three predicted continued to lose money, and the answer sheet handed by innovative pharmaceutical companies to the secondary market in 2021 seems to be much better than the full-line loss in 2020. But they are no longer the darlings of capital.
Almost every respondent in the mixed new drug circle can say without thinking about the biopharmaceutical listed companies that broke out in December 2021, and even their first-day declines.
Especially in recent months, innovative pharmaceutical companies have been reduced to the bone by relying on the gains brushed by the new crown epidemic, including the star company of the new crown vaccine, CanSino. According to the performance express, CanSino's revenue in 2021 will rise by 17,000 times, and the net profit will exceed 1.9 billion yuan. But its stock price has fallen from more than 400 yuan in mid-2021 to more than 100 yuan, which is the level before the stock price "took off" in March 2020.
The negativity of the secondary market is quickly transmitted to the primary market. Many people in the investment community admitted that since at least the fourth quarter of 2021, some well-known US dollar funds have temporarily "lying flat" on China's innovative drug investment.
The tide of capital is receding, the price ceiling under the control of medical insurance fees, the inner volume of popular anti-cancer drugs such as PD-1, and the true recognition of China's innovative pharmaceutical companies in the international market are revealed. People are beginning to reflect, is innovative drug development to C or to VC? In the capital game of the past few years, has China's innovative drugs gone through some detours?
Once invested in two pharmaceutical companies every day, now the capital is "lying flat" and no one has taken over
Just like the appointment, investors are less fond of innovative drugs.
"At present, the US dollar fund is generally 'lying flat' on some typical Projects for Hong Kong STOCK IPOs, and pretends to look at the project." An executive of an FA (financial advisor) believes that similar practices are likely to be transmitted to the star market.
"It's very tough." A relevant person in charge of an innovative pharmaceutical company admitted frankly when describing his own Pre-IPO round financing, "There are many funds that were originally very good, and when the market was poor, they all shrank. "Institutions that still have investment intentions have also become extremely cautious, undervaluing is only a basic operation, but also constantly to the enterprise research, repeatedly confirm the company's research and development pipeline, financial situation, market prospects, etc., otherwise, it is difficult for them to make up their minds."
This round of financing has lasted for nearly half a year, and it has been too slow compared to the company's previous rounds. After all, starting in the second quarter of 2020, the financing of innovative pharmaceutical companies often only takes two or three months, or even a month to finalize.
At that time, innovative drug investment and financing was an absolute seller's market. An industry veteran who has been dealing with various innovative pharmaceutical companies for many years recalled, "Every day someone chases after money, and investment is to rely on relationships and face." The most cattle is Biotech, all I have heard is that this time it has opened up several hundred million, and it can only give you how much quota. ”
The closer the project to the IPO, the more popular it is, "just tell me that within two years, it is best to have a listing plan next year, and it will be robbed." Ding Yameng, founding partner of Haoyue Capital, told Finance & Health in October 2020.
Two years later, the innovative pharmaceutical companies that have raised B and C rounds during the epidemic are about to go to IPOs, and suddenly they have become outcasts from the darlings of capital. "The closer you get to an IPO, the harder it is, and the back-end projects are tough." The head of the aforementioned innovative pharmaceutical company said.
Another pharmaceutical company founder also said that so far, the round of financing before the IPO has not been eyebrows. Many dollar funds start in the fourth quarter of 2021 and stop looking at back-end projects, even if they look at it, once they learn that the company plans to declare a listing, "the question is not asked and gone directly.".
"If you want to get more investors involved in the capital markets, give current investors the opportunity to exit, and make the product more well-known, [the company listing] is needed." Sibiman Biotechnology Chairman and CEO Liu Bizuo analyzed.
Exit, which is the moment when all investors wait from the moment they enter the market. In the second and third quarters of 2021, Hillhouse began to withdraw from the ranks of major shareholders of some medical stocks, including "Eye Mao" Aier Ophthalmology and CXO (Cooperative Research Organization) GloriaIn and Tigermed. Some media calculated that hillhouse cashed out more than 3.6 billion yuan in Aier ophthalmology alone.
"Any valuation is based on 100 assumptions, and the shares in your hand are sold to be safe." A person in charge of the pharmaceutical direction of an investment institution pointed out that the problem now is that the unprofitable innovative pharmaceutical company has "a transaction volume of 2 million yuan a day, and (investors) cannot sell out for ten years."
In October 2021, Heyu, which was listed in Hong Kong, had a single-day turnover of more than HK$200,000 to HK$600,000 in the most recent month, and the lowest day traded 2,000 shares, that is, only one shareholder bought a lot, with a turnover of HK$15,600.
The reputation of focusing on small molecule oncology drugs is not unknown, and the capital giant Temasek and the pharmaceutical professional investor Eli Lilly Asia Fund are its shareholders. The Series D funding round, completed in January 2021, was jointly led by Carlyle and Warburg Pincus and is valued at $723 million. Now, even if someone is willing to take over, these shareholders will not make much money. On March 10, 2022, The latest market capitalization of Huize was about $360 million, while their shares had been diluted during the IPO phase.
Also tragic is Beihai Kangcheng, which went public in December 2021. The company, which focuses on rare disease drugs, is valued at nearly HK$4.5 billion in the final round. After the listing, the market value fell all the way to the current HK$2.52 billion, and the E-series investors, including Tigermed, lost nearly half. The company's largest external shareholder is WuXi AppTec, a leader in cro (cooperative research organization).
The endorsement of well-known funds and star enterprises no longer has a strong appeal to ordinary shareholders, and there are many biopharmaceutical companies that are broken when listed. In December 2021, BeiGene, which had been invested by Hillhouse for eight consecutive rounds, landed on the Science and Technology Innovation Board, and nearly 1% of the shares were abandoned by newcomers, totaling nearly 200 million yuan.
"In the past, everyone confused the listing channel with the exit channel, but now they realize that if they are listed, they may not be able to exit." Li Yishi, a partner at Haoyue Capital, said the key.
After years of dealing with investment managers of major institutions, the aforementioned FA executives found that since the second half of 2021, their mentality has changed, "investors will be very anxious if they can't make money, and they want to think about whether to stop investing first, or switch to other subdivisions."
Just in the third quarter of 2021, biopharmaceuticals also set a record high with 89 financing incidents. In 2021, the track raised 878 financings, with an average of 2.4 innovative pharmaceutical companies receiving investment per day.
Rushing ahead are all well-known institutions. According to arterial network data, in 2021, Hillhouse invested in 62 projects throughout the year, 94 sequoias, and invested in one in less than four days on average. In addition, there are at least four funds that invest in at least one medical project per week.
By the fourth quarter of 2021, the aforementioned FA executives noted that a large Fund headquartered in Shanghai had not taken a shot at the pharmaceutical track. Another investment institution with a management scale of hundreds of billions of dollars made it clear, "We don't invest in the concept of covid-19 now." ”
The person in charge of the pharmaceutical direction of the above-mentioned investment institution told "Finance and Economics Health" that the past few months have indeed been more "Buddha". His current idea is that there should not be more projects to invest in, and one or two per year is enough.
"The sentiment of the secondary market will definitely be transmitted to the primary market very quickly, because you will be pushed by all kinds of performance things, and following the market will at least not make a big mistake." According to the analysis of the head of the pharmaceutical department of the above-mentioned investment institution, the investment community is more emotional, and even overreacts, and a certain type of enterprise is touted to the sky for a while, and one will be trampled to the end, which is the norm.
IPO for IPO is an open-book exam that goes straight to valuation
"If I had the option, I wouldn't have advocated for the company going public so quickly." A person in charge of an innovative pharmaceutical company frankly said, "The big mother and uncle who speculate in stocks cannot evaluate unprofitable pharmaceutical companies." But the large number of such investors has an impact on the capital market. ”
The head of the innovative pharmaceutical company found that even professionals could not fully accept the investment logic of unprofitable pharmaceutical companies, and half of the investors who came to talk to him would ask about turnover.
It seems that in this round of post-epidemic investment boom, the listing of enterprises, like the listing of drugs, has become the most important indicator of the success of innovative pharmaceutical companies. A pharmaceutical company founder who has been in business for many years laughed at himself: "The people who have returned to China with the same group are basically operating and listing, and if we don't go up, we will become a broken enterprise."
As of January 2022, at least 23 innovative pharmaceutical companies are still waiting in line for IPOs in Hong Kong stocks or A-shares, and many more are planning to submit listing applications in 2022.
It takes at least 6 to 12 months from filing to listing. Going back 12 months, for the biopharmaceutical companies at the time, choosing to go public meant great financial success. Six months ago, the Hang Seng Biotech Index climbed to an all-time high since the COVID-19 pandemic.
Today, the market value of "one brother" Hengrui Pharmaceutical has been slashed, the price of BeiGene A shares has fallen by one-third, and most of the unprofitable pharmaceutical companies listed on the Science and Technology Innovation Board are in a state of breaking. Chen Chen, a Chinese pharmaceutical analyst at UBS Securities, admitted in an interview in early 2022 that "market sentiment is more pessimistic. ”
Now the traders of investment institutions have picked up some common sense again, "Innovative drugs are nine deaths, and many Biotech companies in Europe and the United States burn out the money and end." China's pharmaceutical industry has developed relatively slowly before and has not experienced a bubble. But over the past year and a half, valuations have risen too high. ”
In interviews with Caijing Health, a number of companies used the term "opportunity", that is, with the goal of listing in 2022, when to publicly issue it is to be determined. A staff member of a company that has already passed the meeting revealed that they may appropriately control the scale of fundraising in order to carry out "market value management".
If you are walking on thin ice, why do you want to IPO? Most likely to fulfill the VAM agreement with the investor.
In the boom in innovative drug investment before the first half of 2021, it was almost common to require invested companies to IPO within a certain period of time, and even attached relevant VAM clauses, such as share repurchases, cash compensation, etc. Luo Yonghao, the founder of the original Hammer Technology, was sued by investors for failing to gamble, and once became a dishonest executor.
After the outbreak of the new crown epidemic, a large amount of money poured into the pharmaceutical track. "Go to the pharmaceutical industry park to see, please recommend the park may decide to invest." Or which big investment institutions have invested, I can't go wrong with it. Industry veterans pointed out that in the past year and a half, people seem to think that investing in medicine is "making money with your eyes closed."
The way to make money is through ipipos. "Some capital is here to speculate." 18A' and the Sci-Tech Board, everyone is running to that standard. Get on the market quickly, and then some people arbitrage and leave. The aforementioned industry veteran told Finance and Economics Health.
The "18A" clause of Hong Kong stocks and the fifth set of standards for the A-share Science and Technology Innovation Board were once regarded as opening the exit channel for investors in unprofitable pharmaceutical companies. Among them, the Science and Technology Innovation Board has given clear criteria for the listing of unprofitable pharmaceutical companies: the expected market value is not less than RMB4 billion, and at least one core product has been approved to carry out Phase II clinical trials; "18A" requires biotechnology companies to meet "adaptive clauses".
"It's like an open-book exam, directly linking the IPO with money and clinical approval, 4 billion + phase II, this is the standard answer." It is equivalent to transferring the pressure to the CDE (National Drug Evaluation Center). The aforementioned FA executive pointed out that this also gives the company the opportunity to "flood".
The most direct "irrigation" resource is the license in . "To have a product in the clinical phase II, the simplest is to buy one to make up the number, it may be good or others may not want it, in short, it can do the clinical phase II." I know that was the case with some companies last year. "The aforementioned industry veterans are sharp-tongued.
On February 2, 2021, HeboPharm, which has been listed on the Hong Kong stock market for less than two months, announced that its partner Immunovant has suspended two clinical trials of bartolizumab. This is the core pipeline of Hebo, which accounts for 29% of its IPO funds and was once seen as the fastest product to go public.
Subsequently, BIOTEC, which was listed on the Science and Technology Innovation Board, stopped the clinical trials of three drugs in succession. This is the second unprofitable pharmaceutical company listed through the fifth set of standards, and of the market value of 25 billion yuan on the first day of listing, 20 projects under research, each of which has been converted into money by the capital market. Three projects that were called off included the "core technology" that BIOTEC was once proud of. In the prospectus of the science and technology innovation board, BAT8001, which was first stopped, was benchmarked against similar products of the multinational pharmaceutical company Roche Pharmaceutical, whose sales in 2018 were about 6 billion yuan; there was also a PD-1 (programmed death receptor 1), which was expected to have a market of 100 billion.
"Everything is transparent after the listing, how is the company's core competitiveness, how big is the expected market, what is the commercialization ability, what products are followed, and what kind of development path is planned?" These are the questions you have to answer every day. The person in charge of the aforementioned innovative pharmaceutical company believes that the patchwork pipeline is reluctantly IPO, it is difficult to withstand the torture of a large number of shareholders, and then once it is broken, the stock price will fall straight, and investors will not invest.
How long can the annual salary of tens of millions of diggers and tens of billions of orders grab CRO money burn?
If capital really no longer favors innovative drugs, the money raised by biopharmaceutical companies will soon burn out.
In 2021, the total investment in the new drug field exceeded 70 billion yuan; in the first 10 months of the year alone, China's CXO leader WuXi AppTec had a backlog of more than $10 billion in orders.
"We are 'Alipay', and when we come to the CXO, we will transfer it to CXO." The founder of the aforementioned pharmaceutical company that is raising funds joked.
Biotech is a crazy money-burning industry, without money, scientists can't play this game. To get the capital to pay, it must meet their expectations, the IPO is one, and the opportunity to become the leader of the subdivision track is another, the latter is the guarantee to reach the former's 4 billion yuan valuation target.
"The most important thing is to be fast. If you want to grab it quickly, grab the PI (the main investigator of the clinical trial), grab the patient, grab the CXO, the capital is to ask them to grab. Cheng Zengjiang, the founder of Tongshu Freehand, summed up "Finance and Economics Great Health".
It's like a race, taking the lead in the clinic, the first to enter the key phase II, the first to enter the third phase of large-scale trials, at each stage, the fastest one, can get more funds to replenish, and then run faster - if it falls out of the first echelon, capital will not look at it more.
Only the first place is in line with capital's imagination of the future market.
THE BAT8001, which WAS CALLED OFF BYOT, has given capital such an imagination, and it is the first of its kind to enter the clinical phase III in China. "The first to enter the clinical phase III", which is directly linked to the value of investment, means that the company is likely to become the first to obtain the license of similar drugs in the Chinese market, take the lead in selling, and then occupy most of the market. For this expectation, BIOTEC spent 226 million yuan on BAT8001. Although the final particles are not harvested.
Chinese investors will have a hard time adapting to this failure. After the termination of clinical trials of the three major products, BIOTEC's stock price fell by one-third in two months, and the current market value fell to about 10 billion yuan. During this period, the company tried two Hong Kong stock IPOs, both of which failed. There have been no public reports of successful financing in the primary market.
An innovative pharmaceutical company, there are too many places to spend money. Some people in the industry have calculated that if it is a tumor drug, the first phase of clinical treatment will cost 3 million yuan to 50 million yuan, the second phase is tens of millions, and the third phase is tens of millions or even hundreds of millions of yuan.
"Now there are not enough mice, monkeys and patients doing experiments, so they have to grab it." I heard that PD-1 blood tumors have not been able to find patients to undergo clinical trials, relying on recruitment companies, the recruitment cost of a patient is 400,000 to 500,000 yuan, which is only for intermediaries, not including the money to be paid to patients. An industry insider once broke the news to "Finance and Economics Health".
Robbing people is even more fierce. According to Cheng Zengjiang, as early as 2020, China's high-end pharmaceutical talents have surpassed Boston in the United States.
"The annual salary of the CMO (chief medical officer) is starting at 5 million yuan and capped at 20 million yuan, which does not include shares." Cao Jin, chief talent officer of Tongyi Yi, introduced that in Shanghai Zhangjiang Medicine Valley, even if it is a middle-level person, as long as they get a pay slip, they will jump ship and directly increase their salary by 50%. He felt that this kind of effort was worth it, "Phase II clinical to phase III clinical, if you ask a CMO to shorten a year, then what is the annual salary of 10 million yuan?" ”
Everyone has developed the same type of drug, and has a common target, similar structure, the same indications, similar dosage forms, and efficacy and safety that are not too different from the successful cases that have been listed by multinational pharmaceutical companies. For example, PD-1, a star target that once claimed to have a market of 100 billion yuan in China, before the relevant products of domestic enterprises Cinda and Junshi were approved, similar drugs have been successfully sold in the US market for at least four years.
China's new drug research and development, mainly through the path of following, changing, buying and other paths, focuses on the level of follow-up innovation that has been found to be verified and the R&D failure rate is low. "Although it is a reasonable model to solve the problem of drug accessibility, it is prone to deficiencies such as drug accumulation of the same target." Shen Nanpeng, founding and managing partner of Sequoia Capital China Fund, said.
The important theme word for 2021 is "inner volume", and the same is true in the field of new drug research and development.
Cheng Zengjiang analyzed, "When everyone is optimistic and everyone makes money, this track attracts a lot of people to enter, and in the end it is impossible to avoid doing the same thing." ”
Such an inner volume is also inseparable from investors. "Many people like me-too drugs, think insurance, hurry up and send you to the IPO, I cash out and withdraw it." An industry veteran pointed out that the target favored by these investors is often the "Red Sea" of the future. Which targets are reliable, which can be made into medicines, or scientists are more aware, when investors come to tell you, it is already hindsight.
As a result of the inner roll, with six drugs already on the market in early 2021, at least 70 PD-1 products are still under research in China. At the same time, after experiencing medical insurance negotiations, PD-1 has reduced the annual treatment cost from nearly 180,000 yuan to 50,000 yuan, and the imaginary "100 billion market" has shrunk by two-thirds.
Some pharmaceutical founders have calculated that once the annual treatment cost of PD-1 is less than 40,000 yuan, biopharmaceutical companies without strong sales capabilities will not make money, or even lose money. Knowing that you can't make money, but you can't say stop and stop, how long can innovative pharmaceutical companies last?
"Two or three years." An executive of an innovative pharmaceutical company judged that if there is no capital to continue to transfuse blood, this may be the countdown to the lives of some innovative pharmaceutical companies.
"Going to sea" may be a way out, but you have to live first
According to Li Yishi's prediction, China's innovative pharmaceutical companies are about to usher in a period of transformation that may last up to five years. If you want to survive, you still have to fight for the favor of capital.
The founders who are waiting for capital hope that the pharmaceutical sector will improve in the second half of 2022. However, the Russian-Ukrainian war that has just begun makes it uncertain when the capital market will stabilize.
Another way out for practitioners is to go to sea. In particular, at the end of February 2022, Legendary Bio's CAR-T products were approved for marketing by the U.S. Food and Drug Administration (FDA), making this path clear.
Capital's use of "going to sea" as a new criterion is also an important reason. When Chen Chen answered the question of "Finance and Economics Great Health", he regarded "going to sea expectations" as one of the two major criteria for stock selection, and the other was to avoid the target of white-hot competition.
Chen Chen said that looking at the Chinese market alone, even if the competition is not fierce, the price of drugs will not be particularly high. "For example, 1.2 million yuan of CAR-T, certainly can not enter the medical insurance." But for the United States, drugs of 100,000 yuan - 300,000 yuan in China (annual treatment cost) can be sold for 100,000 US dollars - 300,000 US dollars. Relatively speaking, the earlier the drugs are available in the United States, the greater the market share. ”
An interviewee who served as the head of overseas strategic investment at Alibaba added that if it can get the CERTIFICATION of the US FDA, it will be a strong confirmation that the new drug has the potential to become a best in class, and it also means that the future is likely to be able to declare in Europe and other regions. If you add the recognition out of the multinational pharmaceutical companies, it solves the problem of international business path.
"Going to sea will give companies and investors a lot of confidence." I may not understand it, but it can be verified by a professional person. The statement of the above-mentioned investment circles reveals the logic behind the hot speculation of the topic of "going to sea".
It's really hard to go to sea. Before Legendary Biology, only a BTK inhibitor in BeiGene, was successfully listed in the United States by Chinese pharmaceutical companies, zebutinib, which was approved by the priority review channel in late 2019 for the treatment of relapsed refractory sleeve cell lymphoma. In 2021, the drug will have sales of about 700 million yuan in the United States, accounting for half of the global sales of zebutinib in 2021.
Putting aside the disturbances from the outside world, the person in charge of the pharmaceutical direction of the aforementioned investment institution put forward his harsh requirements for the ideal target of the new stage: similar blood products have extremely high policy barriers, pet drugs and other "blue oceans", and "real first-in-class".
Li Yishi agreed with the last item, "The first-in-class used to look at the top three and top five, and now even if you are the first, it depends on how many people are behind you and how much they are behind, and whether their business capabilities are stronger or weaker than you." ”
At this stage, in the relatively more cutting-edge segmentation tracks such as cell therapy and gene therapy, there is a possibility of real "first-in-class" products, because China's innovative pharmaceutical companies started no later than Europe and the United States, and technology and data can convince European and American regulators and peers, legendary and BeiGene are among them.
Li Yishi believes that APIs or preparations with higher technical barriers will also rise. For example, a raw material for nucleic acid drugs, a company in Shanghai is doing, before this was a neglected field, after the fire everyone found that sequoia has been invested, and now want to invest can not be invested. In addition, Hillhouse invested in a company that made key fillers in protein purification filter columns in the early days of the new crown epidemic. "These are the key ingredients and components necessary for a new track to rise."
In short, returning to the clinic and meeting unmet needs should be the constant way for innovative drugs to redeem themselves.
When asked how the company's new round of financing will convince investors, the first words of Yu Qiang, the founder of Shengshi Tyco, were, "My safety cushion is the thickest." Yu Qiang's "safety mat" is an original research and innovative drug that is about to complete phase III clinical trials, and a rare disease first generic drug that has been approved for marketing.
The person in charge of the pharmaceutical direction of the above-mentioned investment institution said more bluntly, "I do not deny that there are many companies in China that have feelings and do high-end products. But business is business, and what can make money is good business. Consider the worst-case scenario, if the stock market has no investment function, then the company that can survive and has the ability to make blood is a good company. ”