Summary of the report
Company overview
Founded in 2009, Biosetto is a revenue-generating company for biopharmaceutical and preclinical research services. Its business model mainly includes drug development and preclinical research services.
The company has an independent original technology platform. The company has three underlying gene editing technology platforms (SUPCE, CRISPR/EGE and ESC/HR), and based on this, it has constructed a rich combination of model animals and large-scale animal breeding, which can carry out preclinical pharmacological and efficacy evaluation research. At the same time, the antibody development work can be realized based on the unique and innovative whole-human antibody discovery platform, which has been fully verified by external authorization and internal clinical pipeline.
The company has FIC or BIC antibody pipeline. It contains 2 core products of YH003 (CD40), YH001 (CTLA-4) and 10 other pipeline products, of which 3 drug candidates have authorized transfer arrangements with different partners, and all drug candidates are found through the autoantibody discovery platform.
The company's revenue grew rapidly, reaching 170 million yuan, 250 million yuan (+ 49.3%) and 350 million yuan (+ 39.8%) respectively from 2019 to 2021, while revenue in the first four months of 2022 increased from 70 million yuan in the same period in 2021 to 120 million yuan. The annual losses from 2019 to 2021 were 310 million yuan, 480 million yuan and 550 million yuan respectively. From 2019 to 2021, gene editing services accounted for 40.1%, 27.3% and 14.4% of the total revenue, respectively; preclinical pharmacological and efficacy evaluation accounted for 28.6%, 29.7% and 29.8% of the total revenue; and model animal sales accounted for 29.6%, 26.0% and 30.3% of the total revenue.
Industry status and prospects
The market scale of antibody development is constantly expanding, and whole-human antibody mice have a competitive advantage. The global market size of antibody development business in 2020 is US $10.1 billion, while the market size in China is RMB 8.3 billion yuan. According to Frost Sullivan, about 70% of all human McAbs come from mouse technology platforms. The market share of Bai Oseitu's antibody development business in the world and China is 0.1% and 0.4% respectively.
The market for preclinical research services is growing steadily, with the global market expected to reach about $70.6 billion by 2030 and the Chinese market to about 150.1 billion yuan by 2030. Among them, the market scale of preclinical pharmacological efficacy evaluation and model animal sales is constantly expanding. It is expected that the global market for preclinical pharmacological efficacy assessment services will reach about US $18.1 billion in 2030 and about RMB 30.3 billion in China. The global model animal sales market is expected to reach US $17.8 billion by 2030 and about RMB 19.5 billion in China.
The market scale of tumor antibody drugs is expanding continuously. It is expected that in China, the market size of CD40 drugs is expected to reach 557.1 million yuan in 2025 and will further increase to 5135.1 million yuan in 2030. YH003 is expected to be the only approved CD40 antibody drug in China in 2025, with a market size of 557.1 million yuan. In China, the market size of CTLA-4 antibody drugs is expected to reach 3.8 billion yuan by 2025 and further increase to 13.5 billion yuan by 2030.
Advantages and opportunities
The company's clinical and preclinical product lines cover a wide range of antibody candidates.
The company's reliable gene editing technology platform lays the foundation for antibody discovery of mouse models and disease model animals.
The company creates a unique and innovative large-scale antibody drug discovery program to discover antibody molecules for internal drug development or external realization.
The company generates a RenMice platform that enriches the whole human antibody library.
The company uses a comprehensive combination of model animals, large-scale animal production and in vivo efficacy research.
Weakness and risk
Competition in the industry has intensified.
The process of clinical drug development is long and expensive, and the results are not clear. The results of early studies and trials may not be used as indicators of future trial results.
Developing candidate products in combination with other therapies may expose the company to other risks.
There are uncertainties in regulations and regulatory rules.
The purpose of the proceeds from the issue
The company intends to sell 21.7585 million H shares (in front of the green shoes) globally at HK $25.22 per offer share, each of which is expected to be listed on the main board on September 1.
According to the prospectus, the total net proceeds from the global offering (the offering price is HK $25.22 per share assuming the over-allotment option is not exercised) will be about HK $471.1 million. The net proceeds from the sale are expected to be used for the following purposes:
(1) about HK $329.8 (about 70 per cent) is intended to be used to finance further clinical research and development of the company's core products:
Of this amount, about 164.9 million Hong Kong dollars (about 35 per cent) will be spent on YH003 research and development; about 164.9 Hong Kong dollars (about 35 per cent) will be spent on YH001 research and development.
(2) about HK $70.7 million (about 15%) will be used to fund antibody drug discovery and development under the company's ten-thousand-mouse anti-drug plan: of this amount, about 23.6 million Hong Kong dollars (about 5%) will be used for infrastructure and antibody drug discovery equipment procurement under the ten-mouse ten-million-antibody plan; 23.6 million Hong Kong dollars (about 5%) will be used for staff costs under the program. Another 23.6 million Hong Kong dollars (about 5%) was spent on other costs.
(3) approximately HK $47.1 million (about 10%) will be used for the preclinical and clinical development of the company's other pipeline products: of which about HK $14.1 million (about 3%) will be used for YH002 clinical promotion; HK $9.4 million (about 2%) will be used for YH004 clinical promotion; HK $23.6 million (about 5%) will be used for other drug candidates (including YH008, YH009, YH006, YH010, TH012 and YH013, etc.) clinical promotion.
(4) about HK $23.6 million (about 5%) will be used for working capital and other general corporate purposes.
Cornerstone investor
Cornerstone investors have agreed to subscribe for a certain number of offer shares that can be purchased at a total of US $49.8 million (or about HK $390.4 million) subject to certain conditions. Assuming the offer price is HK $25.22, the total number of offer shares to be subscribed by cornerstone investors is 15.4785 million shares.
Cornerstone investors include Vico (Hong Kong) Economic and Trade Co., Ltd. (wholly owned by Vico Holdings), Rongchang Biological (688331.SH), Sanjin International Co., Ltd. (wholly owned by Guilin Sanjin (002275.SZ)), QuantumPharm Inc. (the holding company of Jingtai Technology), and Beijing Xingxing Equity Investment Partnership (Limited Partnership).
Investment suggestion
Bai Oseatu is a biotechnology and preclinical research service income-generating company that drives new drug research and development with technological innovation, with comprehensive R & D strength of the whole chain. The company's revenue is growing, from 160 million yuan in 2019 to 350 million yuan in 2021; consolidated gross margin is also rising, from 57% in 2019 to 70%; and the growth rate of losses has slowed significantly.
The company's antibody development business and model animal sales business are growing rapidly. The company has three underlying gene editing technology platforms (SUPCE, CRISPR/EGE and ESC/HR), and based on this, it has constructed a rich combination of model animals and large-scale animal breeding, which can carry out preclinical pharmacological and efficacy evaluation research. At the same time, the antibody development work can be realized based on the unique and innovative whole-human antibody discovery platform, which has been fully verified by external authorization and internal clinical pipeline.
The company has also established a pipeline of selected first-in-class or best-in-class antibody drug candidates. It contains 2 core products of YH003 (CD40), YH001 (CTLA-4) and 10 other pipeline products, of which 3 drug candidates have authorized transfer arrangements with different partners. In addition, the company has experienced management team and star investors.
Taking into account the scarcity of antibody development and model animal quality targets in Hong Kong stocks, as well as the high growth rate of business and better competition pattern, we give IPO a special rating of "6.5".
