Company profile
The predecessor of Chuangsheng Group was Maibos Biotech, a biomedical company founded in 2012 to treat and diagnose antibodies to cancer, metabolism, and autoimmune diseases. It was later merged into Chuangsheng Group in 2018 through a series of investments, incubation, and integration with Eli Lilly Asia Foundation (LAV). Currently, the CEO of the company is Dr. Qian Xueming, the founder of Maibos Biotech, and the chairman of the board is Dr. Zhao Yining, founder of Yi'an Jieshi. The company has a product pipeline composed of 9 drug candidates. The main products include MSB2311, a humanized PD-L1 monoclonal antibody (monoclonal antibody) for TMB-H solid tumors, TST001, a humanized Claudin 18.2 monoclonal antibody for solid tumors such as stomach cancer, and TST005, which targets solid tumors such as lung cancer. The company has received many well-known institutional investors to participate in pre-listing financing, including Temasek, China State-owned Enterprise Restructuring Fund, Qatar Investment Authority, High House Capital, and Sequoia Capital.
Views of China and Thailand
The core product, MSB2311, is leading in the industry, and its long-term potential is worth looking forward to. The company's core product is MSB2311, discovered and developed based on its own IMTB technology platform and internal antibody library. It is a candidate drug for humanized PD-L1 monoclonal antibody (monoclonal antibody) for solid tumors. As the first and only “recycled” PD-L1 antibody, MSB2311 can greatly prolong the residence time of drug targets in tumors and increase tumor killing activity in the body. In 2020, the number of solid tumors in the world and China was 45.5 million and 8.4 million. Some of the most prevalent cancers, such as lung cancer, stomach cancer, rectal cancer, liver cancer, and esophageal cancer, can respond to treatment with PD-L1 drugs. According to insight data, in 2019, the total number of cancer cases that may have responded to PD- (L) 1 antibody treatment in China exceeded 3 million per year, while the number of patients exceeded 7.5 million. In March 2021, 8 types of PD-L1 antibodies were approved for marketing and use in China, but none were approved for TMB-H tumors. MSB2311 is the only PD-L1 candidate drug candidate for clinical development where TMB-H tumors have been included in trials in China, and is expected to gain a leading position in the development of this indication. There is only one product in the US (MSD Corrida) approved for the treatment of second-line unresectable or metastatic TMB-H solid tumors in June 2020. According to insight data, the market size of PD-L1 antibodies used to treat TMB-H tumors in China is expected to grow from 15.4 million US dollars in 2025 to 500 million US dollars in 2035, with a compound annual growth rate of 42%, with huge potential for growth. The company adopted a rapid marketing strategy for MSB2311. It was approved to conduct a phase 2 trial on patients with TMB-H solid tumors in January 2021, and plans to apply to start the MSB2311 registration phase 2 trial for TMB-H pan-solid tumors in the first half of 2022. In the second half of 2022, it will start a phase 2 registration study trial in China and complete the trial by 2024.
Financial analysis: For the 2019-2020 fiscal year and the first three months of 2021, the company's revenue was 44.14 million yuan, 80.98 million yuan and 7.88 million yuan respectively. Since there are no products approved for commercial sale, the vast majority of revenue comes from providing contract R&D and production organization (CDMO) services to customers; gross profit was 6.91 million yuan, 18.2 million yuan and 2.74 million yuan respectively; R&D expenses were $220 million, 200 million yuan and 46.99 million yuan; return losses were $40,000, $320 million and $70.44 million respectively Yuan; cash and cash equivalents at the end of the year were $460 million, $8.1 billion and $1.04 billion.
Peer comparison and valuation level: We selected three Hong Kong stock companies that produce PD-1 inhibitors for benchmarking, namely Cinda Biotech (1801 HK), Junshi Biotech (1877 HK), and Kangfang Biotech (9926 HK). Cinda Biotech and Junshi Biotech have submitted their first indicative marketing application for the PD-1 drug at the time of marketing, while Kangfang Biotech is in phase II clinical trials. The company's products are currently also in phase II clinical trials. Clinical trials are expected to be completed in 2024, so it will take some time to launch. Currently, there are no approved products suitable for TMB-H tumors in China, but the market size of PD-L1 antibodies used to treat TMB-H tumors in China is not large, so the company's valuation should be at a low level of the industry average. Based on the company's share capital of 450 million after the global public offering, the corresponding market value is HK$7.0-7.1 billion.
Sponsor history: Goldman Sachs is the price stabilizer this year. It participated in a total of 15 sponsorship projects this year. On the first day, its performance rose 8, 6 fell 1 level.
Cornerstone investors: On the cornerstone side, four investors, Temasek, China State-owned Enterprise Structural Adjustment Fund, LAV (Eli Lilly Asia Fund), and Qatar Investment Authority, were introduced to subscribe for a total of about US$68 million. Assuming that the price was limited according to the sale price range and no over-allotment rights were exercised, they accounted for a total of about 81.89% of the shares sold (before Green Shoe).
Subscription proposal: The company's core product, MSB2311, was approved to begin a phase 2 clinical trial on patients with TMB-H solid tumors in January 2021. Considering phase 3 clinical trials and the time required for approval and marketing, there is high uncertainty about future product commercialization. However, considering that many companies of the same type have gone public with the progress of clinical trials and listing of PD-1 products, their stock prices have risen sharply, so we believe that if clinical trials of the company's products can proceed smoothly, they will gradually gain market recognition after listing. However, from a short-term perspective, the risk is high. Overall, it was given a score of 69, and the rating was “neutral.”
Purpose of raising capital: Assuming that the company did not exercise any over-allotment rights in the end and that the sale price was HK$15.9 per share, raised about HK$570 million, of which about 82% would be used for research and development of candidate products for the company's pipeline, funding ongoing and planned clinical and pre-clinical trials, preparation for registration and filing, and other steps or activities related to the commercialization company's four main products; about 8% was used to finance business development to expand pipelines and develop technology; about 10% was used for general corporate purposes and to meet working capital requirements.
Risk warning: (1) Market competition risk, (2) the company is in a loss, revenue is not stable, (3) R&D progress falls short of expectations, and results are uncertain
