China Times (www.chinatimes.net.cn) reporter Cui Xiaotian reported in Beijing
"Developing the future of original anti-tumor new drugs" - this is the mission of Haihe Drugs written on the home page of the official website, but it was crushed by the "soul three questions" used by the Listing Committee of the Science and Technology Innovation Board of the Shanghai Stock Exchange.
On July 20, Haihe Pharmaceutical's IPO process on the Science and Technology Innovation Board stepped on the brakes, and after on-site inquiries by the Listing Committee, the final result was to suspend the review. Some insiders commented that the Listing Committee's inquiry question was "very strong", pointing out whether Haihe Drugs had independent core technology and research and development strength.
In fact, there are no products on the market, most of the R & D pipelines are supported by authorized introduction or cooperative research and development, and the innovative pharmaceutical companies that have recently been seeking IPOs are not the only ones in Haihe Pharmaceutical. An unnamed investor in the field of medical and health care told the "China Times" reporter that this time the matter of haihe drugs may be a sign, reminding enterprises like haihe drugs not to choose to list on the science and technology innovation board, and the science and technology innovation board welcomes enterprises with core research and development capabilities.
Purchased product pipelines
The Listing Committee inquired about haihe drugs on the spot with four questions, involving research and development capabilities, core products, related party transactions, and loss of state-owned assets.
Regarding R&D capabilities, the Listing Committee asked Haihe Pharmaceutical to explain the following three points: First, the specific role played by core technologies in the research and development of major products, and whether the issuer has independently and autonomously made substantial improvements and substantive contributions to the core products introduced or cooperatively developed.
The second is whether there is a significant dependence on third-party technology mainly relying on authorized introduction or cooperative research and development to introduce relevant product pipelines, and the issuer's self-evaluation of "having independent research and development capabilities, complete technology research and development system, and no core technology relying on third parties" is based on historical facts or based on future prospects.
The third is to analyze whether the issuer meets the fifth set of listing standards stipulated in the Rules for the Review of the Issuance and Listing of Shares on the Science and Technology Innovation Board of the Shanghai Stock Exchange, taking into account the fact that the core products of the issuer have carried out phase II or more clinical trials are derived from the authorization to introduce or cooperate in research and development.
In fact, as early as after Haihe Pharmaceutical submitted the prospectus, the regulator has noticed the problem of its research and development capabilities and conducted two rounds of inquiries. So what is its real strength?
Combing through Haihe Pharmaceutical's prospectus and response to the inquiry letter, it can be found that it has not yet had a product on the market. Since its inception, Haihe Pharmaceutical has carried out a total of 19 projects, except for the HH3806 project, all of which are authorized to introduce or cooperate in research and development. Among them, the main compound patents corresponding to the 8 core products are either introduced through authorization and obtained the authorization license of the relevant patents; or the Shanghai Pharmaceutical Research Institute and other scientific research institutions complete the patent invention, and Haihe Drugs signs a cooperative research and development agreement with it and becomes the patentee through the change of patent right. There is also a situation where Haihe Pharmaceutical and Shanghai Pharmaceutical Research Institute divide labor to complete the patent invention work, and then jointly apply for a patent.
This means that the ability to develop independently and autonomously for sea and drugs may be lacking. This is not a good sign. The above-mentioned investors in the medical and health field said that in the primary market, judging the research and development capabilities of a company, we need to pay attention to multiple levels, such as whether the drug molecules are designed by their own team, the core personnel of the team are from the pharmaceutical industry with technical background, or capital operation people, etc. "For enterprises that are all 'License in', we (investment) will be very cautious."
It is worth noting that as of the end of 2020, the original book value of Haihe Pharmaceutical's research and development equipment was 6.5533 million yuan, and the book value was only 2.6168 million yuan. This is far lower than other listed companies in the same industry, such as the original book value of Beida Pharmaceutical Equipment reached 304 million yuan and the net value reached 240 million yuan; the original book value of Microchip Biological Equipment was 35.0911 million yuan, with a net value of 19.02 million yuan; and the original book value of Zejing Pharmaceutical Equipment was 59.3475 million yuan and the net value was 44.2926 million yuan.
In this regard, Haihe Pharmaceutical said that this is because other companies have purchased a large number of production equipment in the commercial production of drugs, and at this stage, the company's drug production is mainly carried out by entrusting CDMO institutions, and there is no large-scale purchase of drug production equipment.
Can the product be successfully launched?
Not only is there doubt about the research and development capabilities, but it is also unknown whether several core products with rapid clinical trial progress can be smoothly listed and commercialized.
The Listing Committee requested Haihe Drug to explain, first, the latest clinical trial results compared with the indications related to core products such as oral paclitaxel (RMX3001), AL3810, SCC244, etc., to explain the development strategies of these products at home and abroad, the expansion direction of indications and combination drugs, the product registration path and the expected timetable.
Second, combined with the latest results of clinical trials and listing approvals of the same product or competitors abroad, it is explained whether the issuer fully estimates and accurately discloses the risks of clinical trials and listing approvals of the above core products.
Regarding oral paclitaxel, Haihe Pharmaceutical has been authorized by Daehwa in South Korea in 2017 and has obtained exclusive licenses for the drug in the authorized areas of Chinese mainland, Taiwan, Hong Kong and Thailand. At present, oral paclitaxel is undergoing phase III clinical trials in China for the second-line treatment of patients with advanced gastric cancer. As of March 2021, 361 patient enrollments have been completed, and new drug listing applications are expected to be submitted in early 2022.
In addition, oral paclitaxel is undergoing international multicenter clinical trials for the treatment of patients with recurrent or metastatic HER2-breast cancer. Haihe Pharmaceuticals is responsible for Chinese mainland part, and as of March 2021, 462 patient enrollments have been completed worldwide. Among them, 290 cases Chinese mainland enrolled in the group, and it is expected to submit a new drug listing application in the first half of 2023.
It is worth noting that the commercialization of the drug has made very bumpy progress. Indications for oral paclitaxel stomach cancer have been approved in South Korea in 2016, but have not yet been officially marketed. Moreover, although the breast cancer indications of Oraxol, the only competitor of oral paclitaxel, have submitted a new drug listing application to the US FDA, but have not been approved, the FDA pointed out that compared with intravenous paclitaxel, oral paclitaxel may increase the safety risk of neutropenia-related sequelae, and also questioned the relevant data.
In this regard, Haihe Pharmaceutical said that although Oraxol and RHX3001 belong to the same oral paclitaxel drug, there are essential differences between the two products in terms of compound structure, preparation structure, drug absorption principle, and whether auxiliary drugs are needed. The current clinical study of oral paclitaxel in Chinese mainland has not been affected by oraxol-related conditions.
Not only oral paclitaxel, but also another product introduced by Haihe Pharmaceuticals, AL3810, is also frequently problematic. The product was introduced to China by Haihe Pharmaceuticals from Svea, and the results of breast cancer clinical trials conducted overseas at that time were already less than expected.
In three clinical trials conducted overseas, Svea evaluated the effectiveness of AL3810 in patients with metastatic breast cancer. The data show that although AL3810 monotherapy has efficacy in such patients, it is unlikely that the efficacy will be significantly higher than that of existing standard treatments compared to historical data. As a result, Schweitzer terminated the further development of AL3810 in breast cancer patients as early as 2015.
In this regard, Haihe Pharmaceutical said that its introduction of AL3810 will not be considered for single-drug treatment of breast cancer, but will consider combining with other drugs to treat breast cancer, and is also exploring other indications for AL3810, such as nasopharyngeal cancer and small cell lung cancer.
However, at present, the clinical trial data of AL3810 in the indications for thymic cancer are not very promising. In April 2021, the Independent Data Monitoring Board recommended that the study remain blind and further collect clinical data, as well as further communicate with the Drug Review Center. Haihe Pharmaceutical expects that the application for the listing of AL3810 for new drugs for thymic cancer indications will be postponed, and the follow-up research and development plan and listing application time will need to be adjusted according to the response of the Drug Review Center.
This means that Haihe Drugs not only relies on buying, buying and buying multiple R&D pipelines, but also lacks core R&D capabilities, and whether these purchased products can be successfully listed in China and achieve commercialization is also questionable.
The actual controller 1 yuan obtained nearly 20% of the equity
It can also be seen from the above-mentioned pipelines that many of the core products of Haihe Pharmaceutical come from cooperation with the Shanghai Pharmaceutical Research Institute. A more concerned question is, what is the relationship between Haihe Pharmaceutical and the Shanghai Pharmaceutical Research Institute? Whether Ding Jian, the actual controller of Haihe Pharmaceutical and former director of the Shanghai Pharmaceutical Research Institute, was suspected of causing the loss of state-owned assets.
According to public information, Ding Jian successively served as the leader, deputy director and director of the first pharmacology office of Shanghai Pharmaceutical Research Institute from 1994 to 2013. At the end of 2013, after Ding Jian stepped down as the director, he still served as the research group leader and researcher (academician) of the Shanghai Pharmaceutical Research Institute, and served as a member of the academic committee of the Institute of Pharmaceutical Research.
Looking back at the previous equity transfers of Haihe Drugs, there are many doubts. In 2011, Shanghai Pharmaceutical Research Institute invested in patents and jointly established Haihe Pharmaceutical with Zhangjiang Ketou, each holding 50% of the shares.
In 2013, Zhangjiang Ketou transferred its 50% equity to Zehao Investment for 59 million yuan. In 2015, Zehao Investment transferred its equity to Nanjiang, Tibet. Subsequently, Tibet Nanjiang increased its capital, and the shareholding ratio of Shanghai Pharmaceutical Research Institute decreased from 50% to 19.51%.
In 2016, the Shanghai Pharmaceutical Research Institute transferred its 19.51% equity to Green Valley Group for 80.1895 million yuan. Subsequently, Ding Jian acquired the 19.51% equity held by Green Valley Group and the 20.49% equity held by Tibet Nanjiang for 1 yuan. In 2018, Ding Jian transferred 16.48% of the equity of Haihe Pharmaceutical from Nanjiang in Tibet, and became the actual controller of Haihe Pharmaceutical in one fell swoop.
The Shanghai Pharmaceutical Research Institute transferred nearly 20% of the equity at a price of more than 80 million yuan, turned around, and fell into Ding Jian's hands at a price of 1 yuan.
In this regard, the Listing Committee asked Haihe Pharmaceutical to explain the decision-making and approval filing procedures for the transfer of Haihe Drugs equity by the Shanghai Pharmaceutical Research Institute, whether Ding Jian participated in the decision-making process, and whether the above-mentioned decision-making and approval filing procedures complied with the relevant provisions of the state-owned equity transfer. At the same time, compared with the process and income obtained by Ding Jian in accepting the transfer of Haihe Drugs and thus becoming its actual controller, it is explained whether the transfer of Haihe Limited Equity by Shanghai Pharmaceutical Research Institute is fair, and whether the transfer value is seriously underestimated and leads to the loss of state-owned assets.
In this regard, Haihe Pharmaceutical said that this is essentially "the equity incentive of The Nanjiang River of Tibet to Ding Jian". In 2016, Tibet Nanjiang plans to provide Ding Jian with equity incentives of not less than 55% and not more than 60%. Among them, the 40% equity of the first part is planned to be transferred to Ding Jian at one time, of which 19.51% of the equity comes from the compensation of Green Valley Group for Tibet Nanjiang, and 20.49% comes from Tibet Nanjiang. The equity transfer price of these two parts is determined according to the nominal price of 1 yuan. The remaining second part of the equity of not less than 15% and not more than 20% will be given to Ding Jian in the form of options. The source of the stock is Nanjiang, Tibet, and the exercise price is determined by Ding Jian through consultation with Nanjiang in Tibet.
Why was Tibet Nanjiang so generous to Ding Jian? The reason given by Haihe Pharmaceutical is that due to the withdrawal of Shanghai Pharmaceutical Research Institute and Green Valley Group, Tibet Nanjiang, as a financial investor, lacks the professional ability to operate innovative pharmaceutical companies, so "Tibet Nanjiang hopes to retain chairman Ding Jian as the leader of the issuer's subsequent development through equity incentives".
It is not difficult to understand why Haihe Pharmaceutical has cooperated with the Shanghai Pharmaceutical Research Institute to develop a number of products, and the two sides have formed a deep binding. According to 21st Century Business Herald, a company founder who has been deeply involved in gene therapy for many years bluntly told the "truth" of Haihe Drugs: this is a typical capital saving model, which is cobbled together into the image of an innovative pharmaceutical company in the form of "License in", and then securitized and realized through the capital market.
But now, with the suspension of the review of the IPO of the science and technology innovation board, the rapid prosperity of Haihe Pharmaceutical has stepped on the brakes. According to the official website, since its establishment in 2011, Haihe Pharmaceutical has obtained two rounds of financing, totaling 2.084 billion yuan. In February 2019, it received a Series A round of financing, raising US$137 million (about 884 million yuan), led by Huagai Capital, with the participation of Yingke Capital, CSPC Pharmaceutical Group, Hillhouse Capital, Liansheng Venture Capital, Boyuan Capital, Caijin Capital and Dahua Pharmaceutical.
In July 2020, Haihe Pharmaceutical received a Series B financing, raising 1.2 billion yuan, led by Warburg Pincus Investment, with the participation of CMB International, Legend Capital, CICC Capital's funds, Chaos Investment, Langzi Hana, Ruihua Investment and Shanghai Kechuang Fund, and the A-round investors Boyuan Capital, Yingke Capital, Liansheng Venture Capital, CSPC Pharmaceutical Group and their affiliates continued to participate.