The IPO of the Science and Technology Innovation Board|The sponsor Haitong Securities received another fine, and the attributes of Innosys Science and Technology Innovation were questioned by the Shanghai Stock Exchange, and government subsidies once accounted for more than 40% of the total profits

Source of this article: Times Business School Author: Peng Chenyu

Source: Times Business School

Author: Peng Chenyu

Edited by Sun Yiming

Since the beginning of this year, the regulator has cracked down on the illegal acts of the IPO chain, cracking down on the phenomenon of "withdrawal after investigation" and "breaking through with illness" of IPO projects.

On May 8, Haitong Securities (600837. SH) received another fine and was required by the regulator to conduct a comprehensive self-inspection of the listing project.

It should be noted that in April this year, Shanghai Innostar Biotechnology Co., Ltd. (hereinafter referred to as "Innosys"), also sponsored by Haitong Securities, submitted for registration and intends to land on the Science and Technology Innovation Board, but has not yet been approved.

The research of Times Business School found that similar to Kelid, Innosys's issues related to the accuracy of R&D personnel and the authenticity of R&D investment are closely related to the attribute indicators of scientific and technological innovation, which have also been questioned by the Shanghai Stock Exchange.

In addition, from 2020 to 2023 (hereinafter referred to as the "reporting period"), the proportion of government subsidies received by Innostar to its total profit once exceeded 40%.

On May 8, Times Business School sent a letter to Innostar to inquire about the amount of government subsidies and suppliers, but as of press time, the other party has not replied. On May 13, Times Business School called the office of the board of directors of Innostar several times to inquire about whether the fine imposed on Haitong Securities would affect the company's issuance and listing, and whether the relevant indicators of scientific and technological innovation attributes were true and accurate, but no one answered the phone.

The market share of the subdivision ranks high

According to the prospectus, Innostar is a comprehensive research and development service (CRO) company specializing in providing biomedical non-clinical research services, providing a full range of new drug research services that meet domestic and international application standards for pharmaceutical companies and scientific research institutions around the world.

Innosys' business mainly covers three major sectors: early druggability evaluation, non-clinical research, clinical testing and translational research, among which the non-clinical research segment specifically includes non-clinical safety evaluation, non-clinical pharmacokinetic research and non-clinical pharmacodynamics research.

Thanks to the rapid development of the CRO market in mainland China, from 2021 to 2023 (hereinafter referred to as the "reporting period"), the cumulative growth rate of Innosys' operating income and net profit attributable to the parent company reached 33.60% and 49.73%, respectively.

In addition, Innostar is one of the first companies in China to have both GLP certification from the National Medical Products Administration, GLP certification from the Organization for Economic Co-operation and Development (OECD), and GLP inspection from the US FDA (Food and Drug Administration), ranking among the top three in the domestic market share in the field of non-clinical safety evaluation.

The attributes of science and technology have been questioned

On the evening of May 8, Haitong Securities was issued a disciplinary notice by the Shanghai Stock Exchange for failing to fully verify the relevant information of Kelide's science and technology innovation attribute indicators. At the beginning of this year, Haitong Securities was punished by the Shenzhen Stock Exchange and the Shanghai Stock Exchange for investment banking business violations.

The above-mentioned disciplinary punishment letter shows that Kelid inflated the number of R&D personnel by re-signing contracts and transferring posts; The remuneration of full-time R&D personnel participating in non-R&D activities is not apportioned according to working hours, and is included in R&D expenses, resulting in an inflated R&D expense.

The SSE stated in the disciplinary action letter that Haitong Securities failed to fully verify the basis for the identification of Collid's R&D personnel and the accuracy of the amount of R&D investment, and the sponsorship verification work was not in place.

At the same time, the Shanghai Stock Exchange requires Haitong Securities to conduct a comprehensive self-examination of the issuance and listing sponsorship projects, and will inspect the self-inspection and rectification.

It is worth mentioning that in February 2024, the IPO of the Kelid Science and Technology Innovation Board was terminated due to the sponsor Haitong Securities' application to cancel the sponsorship listing.

Times Business School's research found that Innosys, which is also sponsored by Haitong Securities, has also been questioned by the Shanghai Stock Exchange on a number of issues related to scientific and technological innovation attribute indicators.

As a CRO company that plans to sprint to the Science and Technology Innovation Board, Innosys did not establish a technology innovation center until 2022 to form a full-time R&D team to engage in independent R&D activities, while it did not have a dedicated R&D department before.

In this regard, in the second round of review inquiry letters, the SSE asked Innostar to explain the situation of R&D personnel identified among the personnel of the Technology Innovation Center; Combined with R&D activities and personnel identification methods, the calculation process of the number of R&D personnel in the company is illustrated.

At the same time, the Shanghai Stock Exchange also requires the sponsor Haitong Securities to explain the verification procedures and verification ratio performed for the identification of R&D hours and R&D personnel, and to express clear opinions on the accuracy of the identification of R&D personnel and whether the proportion of R&D personnel meets the relevant requirements of scientific and technological innovation attributes.

In the reply document to the above-mentioned inquiry letter, Innostar stated that 66 people in the technology innovation center who accounted for more than 50% of the independent research and development man-hours were identified as R&D personnel of that year. It should be noted that by the end of 2023, the total number of technology innovation centers will be 66. In other words, all employees of its technology innovation center are recognized as R&D personnel.

Haitong Securities also stated in the reply document to the inquiry letter that after verification, the relevant internal controls identified by Innosys' R&D activities, R&D hours, and R&D personnel are perfect, effective, and reasonable, and also meet the relevant requirements of scientific and technological innovation attributes.

In addition, the prospectus shows that from 2020 to 2023, the R&D expenses of Innostar will be 19.9383 million yuan, 27.8737 million yuan, 52.3412 million yuan, and 60.4342 million yuan respectively, of which the R&D expenses in 2022 will increase by 87.78% year-on-year, a large increase.

In this regard, the SSE requires Innostar to analyze the changes during the reporting period based on the composition of R&D expenses, and further explain the reasons and reasonableness of the sharp increase in R&D expenses in 2022, whether the relevant R&D investment is real, and whether it has actual R&D needs.

In the reply document to the inquiry letter, Innosys stated that due to the development trend of the industry, the good financial situation, the growth of the number of R&D projects and the increase in investment intensity, the company's R&D expenses have risen significantly, and the content of R&D expenditure is true and reasonable, with actual R&D needs.

The proportion of government subsidies to total profits once exceeded 40%.

As a holding company under China National Pharmaceutical Group Co., Ltd., Innostar has received significant government subsidies in recent years.

According to the prospectus, from 2020 to 2023, the amount of government subsidies included in the current profit and loss of Innostar will be 18.8786 million yuan, 43.0541 million yuan, 39.0913 million yuan and 24.5326 million yuan respectively, accounting for 37.39%, 45.79%, 27.57% and 11.59% of the total profit in the current period respectively.

It is not difficult to find that during the reporting period, the proportion of government subsidies in the total profit of Innostar once exceeded 40%, which had a great impact on the total profit.

Innostar also admitted in the prospectus that the company has received a large amount of government subsidies, and if it cannot obtain government subsidies in the future or the government subsidies obtained are significantly reduced, it will have a certain adverse impact on the current operating performance.

In fact, in the first quarter of this year, Innosys' operating performance declined to a certain extent.

According to the unaudited financial data for the first quarter of 2024, in the first quarter of this year, Innosys' operating income was 296 million yuan, an increase of 17.12% over the same period in 2023; the net profit attributable to the parent company was 56.8798 million yuan, a decrease of 13.61% from the same period in 2023; The net profit after deducting non-attributable to the parent company was 53.3358 million yuan, a decrease of 12.90% from the same period in 2023.

It can be seen that in the first quarter of this year, Innostar has increased revenue but not profits.

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