Recently, the CXO industry has been buoyant, especially in the capital markets and IPO dynamics.
Benefiting from a number of positive news, CXO concept stocks in the A-share market performed strongly today:
As of the close of trading at 15 o'clock, Hongbo Pharmaceutical, Kanglong Chemical, WuXi Biologics and Kailaiying rose 20.00%, 5.04%, 5.88% and 3.99% respectively.
In addition, AI+CXO has a new imagination. At the close of U.S. stocks on July 12, local time, Recursion Pharmaceuticals, a CXO biotechnology company funded by NVIDIA, soared more than 78%.
It is worth mentioning that NVIDIA, the world's leading artificial intelligence (AI) and graphics processing unit (GPU) company, invested $50 million in Recursion Pharmaceuticals to accelerate the development of its AI basic models in biology and chemistry. This is NVIDIA's important initiative in CXO, aiming to use AI technology to advance biotechnology and accelerate drug discovery for pharmaceutical companies. The industry view is that CXO keeping up with cutting-edge technology will provide new growth points.
In terms of IPO dynamics, the CXO industry also showed carnival enthusiasm: WuXi Biologics spun WuXi Biologics went public in Hong Kong, and Baiying Biologics and Peptide Biologics also announced prospectuses one after another, hoping to complete the transformation from unlisted companies to listed companies.
In just one month, the CXO sector experienced a sustained decline and a sudden limit increase. The excessive volatility of the market has also caused the capital market to worry about the value of the innovation chain. The industry view is that the biomedical industry as a whole is undergoing a valuation regression process, and investors should be in awe of the CXO sector until there is a clear trend reversal.
01
Upgrade change
Is it time to ring the bell?
In the past few years, CXO companies have taken advantage of the dividend wind of the domestic innovative drug boom to quickly land on the capital market, with a valuation of tens of billions; Today, biotechnology has turned to a downward cycle, and the CXO link seems to have ushered in the "final carnival".
As a part of the pharmaceutical ecosystem, the survival status of CDMO essentially depends on the external environment. At the end of 2022, the global outsourcing rate of ADC discovery, development and manufacturing reached 70%, far exceeding the overall outsourcing rate of biologics of 34%. Of the 15 ADC drugs approved globally, 13 are manufactured by outsourcers, most of which are outsourced to multiple outsourced service providers.
WuXi Biologics, a leading domestic biopharmaceutical CDMO, announced its intention to spin off WuXi XDC, its biopharmaceutical conjugate CRDMO service company, and list it on the main board of the Hong Kong Stock Exchange.
WuXi Biologics, a separate "Conjugate" business unit, is a leading CRDMO focused on the global ADC and broader bioconjugate drug market. According to public information, in terms of revenue in 2022, WuXi Helian is the second largest CRDMO in the world engaged in bioconjugated drugs such as ADCs; It is also the world's largest bioconjugate CRDMO in terms of the total number of projects by the end of 2022.
WuXi Biologics said that the proposed spin-off will allow WuXi Synerior to have an independent financing platform in the capital market to meet capital needs, and WuXi Biologics will also gain greater flexibility and ability to allocate capital resources among its various businesses.
In addition to WuXi Helian's listing in Hong Kong, another leading ADC CDMO company in China, MyBarry, is also beating with the pulse of the ADC field from weak to strong, and the ChiNext IPO application was successfully passed not long ago.
According to the prospectus, the IPO company intends to issue 101 million shares and plan to raise 1.6 billion yuan, the main fundraising projects are the construction of biomedical innovation center and operation headquarters, and supplementary working capital.
Another CDMO company, Haotian Technology, will also usher in the bell ringing.
Recently, Gansu Haotian Technology Co., Ltd. (hereinafter referred to as "Haotian Technology") submitted a prospectus to the Shanghai Stock Exchange and was accepted, intending to be listed on the Science and Technology Innovation Board. The proposed issuance of no more than 15 million shares and the listing intends to raise 823 million yuan, which will be mainly used for the construction project of high-active API production base, the construction project of CDMO platform of characteristic APIs and supplementary working capital.
According to the official website of Haotian Technology, the company provides CDMO and CRO services in the design, synthesis and functionalization application of high-end pharmaceutical APIs and their key intermediates, adjuvants and other functional molecules for pharmaceutical innovation enterprises, and is a high-tech enterprise specializing in chemical custom synthesis, pharmaceutical intermediates and new drug research and development.
According to the prospectus, the investment projects raised by Haotian Technology are all focused on the main business. Specifically, the company intends to raise 823 million yuan. Among them, 533 million yuan will be used for "high active API production base construction project", 110 million yuan will be used for "characteristic API CDMO platform construction project", and the remaining 180 million yuan will be used for "supplementary working capital project".
In fact, since December 2022, CDMO has come out of the unilateral decline. Layoffs, factory closures, price wars, and various survival pressures, domestic CDMO companies are looking for their own upgrade and change in the development trend of the entire pharmaceutical industry.
The industry view is that the development of the pharmaceutical industry is rooted in the basic needs of human beings for health, and solving unmet clinical needs is a long-term undertaking of innovation and research and development, so the demand for CDMO services will continue to continue. At this time, when R&D investment is tightened and the rate of return continues to decline, how to accelerate R&D efficiency has become a common issue for pharmaceutical companies and CDMO service providers.
02
Seize the opportunity of segmentation
Can you make it through?
In recent years, a large number of start-up pharmaceutical companies have been established, accelerating the rapid development of the CRO industry, and the CRO penetration rate in the global and Chinese drug R&D markets is also increasing year by year, the market will continue to expand, and the competition of domestic CRO companies will intensify.
According to foreign media reports, ClinChoice Kunling is considering listing on the Hong Kong Stock Exchange as early as next year. According to reports, the IPO may raise hundreds of millions of dollars, and the company is valued at about $1 billion.
In addition, Baiying Biotech and Peptide Biotechnology respectively seized the wind in their respective fields and submitted a prospectus at the end of June.
At the end of June, the listing application of Shanghai Baiying Biotechnology Co., Ltd. (hereinafter referred to as Baiying Biotechnology) on the Growth Enterprise Market has been accepted, and its sponsor is Haitong Securities, which intends to raise 1.05 billion yuan.
According to the prospectus, the main business revenue of Baiying Biotech has achieved rapid growth in the past three years, and the total revenue has increased from 68.658 million yuan in 2020 to 260 million yuan in 2022. During the reporting period, the composition of the main business income of Baiying Biotech is as follows:
Peptide Biologics also submitted an application for listing on the Growth Enterprise Market at the end of June. Unlike Baiying Biotechnology, which grasps the wind of pharmaceutical enterprises, Peptide Biotechnology is a national high-tech enterprise committed to the industrialization of peptides, and has become a hot spot in peptide drugs.
According to the prospectus, at present, the main research and development area of Peptide Bio is peptide cosmetic APIs, and the company's main partners are cosmetics companies such as Proya, Bloomage Biotechnology, and Marumi, and the product pipeline covers well-known varieties such as leuprolide, semeglutide, liraglutide, linalotide and so on.
It is worth mentioning that with the approval of semeglutide and the explosion of GLP-1 peptide drugs, the related demand has grown rapidly. Taking advantage of this shareholder wind, Peptide Biotech has risen to solve technical problems in the drug production process, optimize the process path, and provide peptide APIs or advanced pharmaceutical intermediates for enterprises participating in the GLP-1 boom, and its application in the pharmaceutical field has also developed rapidly.
Relying on years of experience and persistence in the field of peptide APIs, the three-year revenue of Peptide Bio increased from 85.9688 million yuan to 210 million yuan, and its main business content of peptide cosmetic raw materials increased from 46.11 million yuan to 138 million yuan.
Industry views predict that whether it is the world or China, the cost of drug research and development is rising year by year. Although the research and development of new drugs is difficult, driven by many factors such as policies and the development of emerging technologies, the enthusiasm for the research and development of drugs, especially innovative drugs, has been increasing.
For CRO companies, is it a long-term development path to catch up with the last dividend window and go public?
Some people believe that in recent years, the demand and number of clinical trials in China have been growing, and the market demand for CRO is also increasing year by year, and the domestic environment is conducive to the development of CRO companies. However, with the increasing maturity of the R&D industry chain, the market scale of CRO companies continues to expand, the market competition is fierce, and overseas CRO company giants have come to Asia (including China) to lay out, further intensifying industry competition, and there has been a serious homogenization of products and services. As long as CRO companies strive to globalize their layout, enhance their core competitiveness, and survive the downward cycle, they will form a significant head effect in the future.