Innovative pharmaceutical company Remegen Biotech (688331. SH and 9995.HK) recently disclosed the fixed increase plan, planning to raise 2.55 billion yuan for new drug research and development projects. At this time, three years have passed since the company's listing on the Hong Kong stock market, and it has just been two years since its A-share listing. The two IPOs raised a total of 6.3 billion yuan, is there a shortage of money so soon?
In fact, as early as January this year, Remegen Biotech had broken the news of cash flow shortage, which once triggered a sharp drop in the company's A shares and H shares. Although the company denied it at the time, the subsequent disclosure of the annual report showed that the company's financial indicators deteriorated, coupled with the fixed increase plan released soon after, all pointed to its desire for funds.
Titanium Media App noticed that Remegen Biotech has suffered a total loss of about 2.932 billion yuan in the past four years. With two commercialized core products, the company achieved a revenue growth rate of 40.26% in 2023, at the cost of a surge of 775 million yuan in sales expenses and a net loss of 1.511 billion yuan.
However, the aggressive sales strategy did not meet the expectations expected, and the company's financing could not keep up with the speed of cash burning. Although the company said that the sales expense ratio will decline significantly in 2024, it remains to be seen whether the company's product commercialization prospects can be optimistic about investors in the face of fierce market competition.
In less than four years, 6.3 billion was burned, and the cash flow was urgent
According to the research projects disclosed in the annual report, Remegen has a total of eight molecules in the clinical development stage, with an estimated total investment of 5.9 billion yuan, a cumulative investment of 3.1 billion yuan, and more than 2.8 billion yuan still needs to be invested.
However, the company's cash flow is deteriorating sharply. According to the annual report, the company's net cash flow from operating activities in 2023 will be -1.503 billion yuan, a year-on-year decrease of 243 million yuan, mainly due to the increase in R&D, sales expenses and other expenses this year.
In 2023, the net profit loss attributable to the parent company of Remegen will be 1.511 billion yuan, which will further expand from the loss of 999 million yuan in the same period last year. Since its listing, Remegen has only turned losses into profits in 2021 (net profit attributable to the parent company of 276 million yuan), and has suffered substantial losses in other years, and its hematopoietic capacity is really worrying.
Performance, source: Wind
Remegen said in its annual report that the company's working capital relies on external financing. If the Company's future working capital is insufficient to cover the required expenses, it will put pressure on the Company's cash position, and if the Company is unable to make a profit or raise sufficient funds to maintain operating expenses in a certain period of time in the future, the Company will be forced to postpone, reduce or cancel R&D projects, which will affect the commercialization progress of the drug candidates, thereby adversely affecting the Company's business prospects, financial condition and results of operations.
It is worth noting that the company disclosed the fixed increase financing plan at this time, which was only more than 2 months after the previous refutation of the rumor of "tight cash flow".
In mid-January this year, there was news in the market that "Remegen Biotech is short of cash flow, facing difficulties in obtaining bank credit and potential litigation risks from suppliers". On January 17, Remegen's A-share and H-share shares fell 15.71% and 22.73% respectively.
At that time, Remegen Biotech issued a clarification announcement, saying that "the company has sufficient bank credit lines, and there will be no shortage of cash flow in the short term that will affect the company's subsequent operations".
One of the points that raised questions from investors is that Remegen, which has excellent financing capabilities, should have more abundant cash flow.
In 2020 and 2022, Remegen completed its IPO listing in Hong Kong and A-shares, with net proceeds of RMB3.785 billion and RMB2.506 billion, respectively, with a total net amount of nearly RMB6.3 billion.
According to the latest disclosure, by the end of 2023, the remaining 43.22 million yuan will be raised in the Hong Kong IPO of Remegen, and the remaining 196 million yuan will be raised in the A-share IPO. Obviously, financing can't keep up with the speed of burning money.
With its own hematopoietic capacity and cash flow shortage, it is difficult for Remegen to support its follow-up R&D and promotion expenditures with the current situation. Pinning hope on the fixed increase in blood transfusion has become a lifesaver. However, in the context of today's tightening of refinancing, it is still unknown whether this private placement can impress regulators and investors.
Aggressive sales fell short of expectations, and competitors were eyeing each other
According to public information, Remegen is a R&D-oriented biopharmaceutical company, mainly focusing on the field of therapeutic antibody drugs such as antibody drug conjugates (ADCs), antibody fusion proteins, monoclonal antibodies and bispecific antibodies, and has a layout in multiple drug markets such as autoimmune diseases, tumors and ophthalmic diseases.
The company currently has two products commercialized, namely tetanercept and vedicitumab. The former is the world's first innovative dual-target biologic for the treatment of SLE (systemic lupus erythematosus), and the latter is the first domestic ADC innovative drug approved for the treatment of gastric cancer and urothelial cancer. Both were approved for marketing in 2021 and have been included in the medical insurance list.
Benefiting from the continuous sales of the above two core products, Remegen achieved operating income of 1.083 billion yuan in 2023, a year-on-year increase of 40.26%.
However, the price to be paid for this is also enormous. Last year, the company's net profit loss attributable to the parent company was 1.511 billion yuan, and the non-net profit loss was 1.543 billion yuan, which was due to the company's continuous increase in R&D investment in research projects and the increase in the promotion of commercial products tetanercept and vedicitumab.
During the reporting period, the company's sales expenses were 775 million yuan, an increase of 75.90% compared with the same period last year. With the significant increase in the number of hospitals and pharmacies covered by tetanercept and vedicitumab, the expansion of front-line sales personnel in the company's commercial team and the increase in commercialization promotion have led to a corresponding increase in sales expenses.
In order to better promote the commercialization of these two products for multiple indications, Remegen has established an autoimmune commercialization team of 750 people and an oncology commercialization team of nearly 600 people.
According to the annual report data, among the sales expenses last year, employee compensation accounted for the highest proportion, reaching 56.23%, accounting for 436 million yuan, and the second-ranked market development expenses, accounting for 262 million yuan, accounting for 33.76% of the total sales expenses.
Sales expenses, source: 2023 annual report
In an emergency investor conference call on January 17, the company's management admitted that "the achievement of the sales target in 2023 does not look ideal".
"In the first two years, new products belong to the development period, the company's personnel expansion is relatively fast, with the market development to the current extent, it can already meet the needs of the company's product sales, and the sales staff will not increase significantly in 2024. At the same time, the person in charge said that with the growth of sales, the company's sales expense ratio will decrease significantly in 2024, and "the company is still relatively confident in sales in 2024."
Judging from the current situation, the competitive environment faced by Remegen may not be optimistic.
As early as 2019, GlaxoSmithKline's belimumab was launched in the domestic market for the treatment of systemic lupus erythematosus. According to the data of Zhongkang Kaisi, the annual drug cost of belimumab after insurance is about 41,500 yuan. According to the research report of Guojin Securities, the annual cost of Tatanercept after entering the medical insurance is about 79,000 yuan. The price higher than belimumab may affect the expansion of the market share of this product.
The track where the other core product, vedicitumab, is also surrounded by wolves. In the field of HER2, a popular target, Roche has the first approved monoclonal antibody drug trastuzumab. In addition, the U.S. FDA recently announced accelerated approval for Enhertu, an antibody-drug conjugate (ADC) jointly developed by Daiichi Sankyo and AstraZeneca. It is reported that Enhertu is the first HER2-targeted ADC therapy with a cancer-neutral indication.
Regarding the commercialization prospects of Remegen's biological products and the progress of private placement, Titanium Media App will continue to pay attention. (This article was first published on the Titanium Media App, by |.) Ma Qiong)