IPO Observation | No Product Launch from Biotech Company, Three Years of Losses Almost $10 Billion
Recently, Biotech Company has submitted its IPO application to the Hong Kong Stock Exchange again, with Goldman Sachs and Jefferies serving as joint sponsors.
This is not the first time Biotech Company has applied for an IPO. In November 2022, it had previously submitted an IPO application to the Hong Kong Stock Exchange, but failed to complete the review process within the prescribed timeframe, which meant that its road to listing on the exchange came to a halt.
Since its establishment in 2018, Biotech Company has not yet achieved product commercialization. Based on authorized products, it continues to incur losses year after year. Can it finally establish its presence on the Hong Kong Stock Exchange?
No Product Launch, Continuous Losses
The company's prospectus states that Biotech Company is a biopharmaceutical company in the late-stage development phase, focusing on developing and commercializing innovative drugs for rare endocrine disorders.
Biotech Company has established a product pipeline with three candidate products, including lonapegsomatropin (LGH), which has received FDA approval in the United States and EMA approval in Europe. In addition to LHG, two other key candidate products, TransCon CNP and palopegteriparatide, are also being developed for pediatric and adult endocrine disorders respectively.
Palopegteriparatide is currently undergoing regulatory review in the United States and Europe. Ascendis Pharma announced on October 2022 that it had received FDA approval for its NDA (new drug application) for palopegteriparatide to treat adult patients with hypoparathyroidism, and the company is in communication with FDA.
In 2021, 2022, and up to May 31, 2023, Biotech Company's R&D expenses were approximately $274 million, $179 million, and $1270 thousand respectively. The core product lonapegsomatropin accounted for 76.2%, 70.8%, and 47.8% of total R&D expenses in the same periods.
It is worth noting that Biotech Company's entire pipeline consists of licensed-in products from Ascendis Pharma, which has authorized the company to develop and commercialize its products. Although Biotech Company has laid out three product pipelines in the endocrine field, none have yet achieved commercialization, resulting in continuous losses.
Biotech Company expects to continue producing losses over the next few years and may never achieve or maintain profitability.
Market Competition Pressure
The company's prospectus states that it will focus on developing innovative drugs for rare endocrine disorders. However, the growth hormone market is already dominated by several leading companies, such as Changchun High-Tech (000661) and Anke Biotechnology (300009).
In 2022, China accounted for more than 34% of the global market share of human growth hormones, surpassing the United States. According to Frost & Sullivan data, China's human growth hormone market size reached $1.7 billion in 2022 and is expected to grow to $3.1 billion by 2026, with a compound annual growth rate (CAGR) of 16.7% from 2022 to 2026.
Growth hormones require long-term use, making it difficult for new entrants to scale up production. The competitive landscape is relatively stable, and leading companies have profit margins of around 80%. Over the past few years, although more domestic companies have entered the market, the top two players have maintained their dominant positions.
Currently, only Changchun High-Tech's subsidiary, Jinshi Pharmaceutical, has three formulations of growth hormone products: powder, water, and polyethylene glycol. Short-acting powder products are available from several companies, including Jinshi Pharmaceutical, Anke Biotechnology, Kexing Pharmaceutical, Haiji Biological, Selbio, and LG Chemical.
Under the intense market competition pressure, will Biotech Company be able to seize its development opportunities?