The highlight of the company
(a) Biosetto is a biomedical and preclinical research service company, the business model includes drug development business (oncology and autoimmune disease treatment research and development and antibody development) and preclinical research services (gene editing, preclinical pharmacology and efficacy evaluation and model animal sales). The company currently has 12 drugs under development, mainly oncology drugs, covering hot targets such as PD/1 and advanced treatments such as double antibodies.
(2) the company has a reliable gene editing technology platform, which lays the foundation for antibody detection of mouse models and disease model animals. Using the self-developed powerful gene editing platforms SUPCE, CRISPR/EGE and ESC/HR, the company continues to provide customized gene editing services for animals and cell lines, so as to meet the basic scientific research and drug development needs of customers. The company has completed about 3500 customized gene editing projects for customers and independently developed about 2500 gene editing animal and gene editing cell model products.
(3) the "ten thousand anti-mouse" program, which the company focuses on, is an innovative large-scale antibody drug discovery program to discover antibody molecules that can be used for internal drug development or external realization. Thousand Mouse Viagra uses evidence-based in vivo efficacy screening method to generate and screen antibodies from more than 1000 potential antibody drug targets. About 300 of these potential targets have entered the clinical stage, and the company strives to complete all screening within 3-5 years.
Industry prospect
The company's business mainly covers preclinical research services (including: model animal sales, preclinical pharmacological efficacy evaluation, gene editing), oncology drug and antibody development. All belong to the market with rapid growth and great potential for development.
Model animal sales market: the global market for model animal sales is expected to grow at a compound annual growth rate of 7.0% between 2025 and 2030, reaching $17.8 billion in 2030. In China, the market will grow at a compound annual growth rate of 14.9 per cent from 2025 to 2030 and reach about 19.5 billion yuan in 2030. In 2020, the market share of the company's model animals in the world and China was 0.1% and 1.8%, respectively.
Market for preclinical pharmacological efficacy evaluation services: the global market for preclinical pharmacological efficacy evaluation services is expected to grow at a compound annual growth rate of 10.6% from 2025 to 2030, reaching about US $18.1 billion in 2030. In China, the market will grow at a compound annual growth rate of 15.6 per cent between 2025 and 2030 and will reach about 30.3 billion yuan in 2030. In 2020, the market share of the company's preclinical pharmacology and efficacy evaluation services in the world and China was 0.2% and 0.8%, respectively.
Gene editing service market: according to Frost Sullivan's estimate, the global market size of gene editing services will be US $3.5 billion in 2020, while the Chinese market will be RMB 3 billion. Among them, the market share of the company's gene editing services in the world and China is 0.3% and 1.3% respectively.
Company operation
The company's revenue increased from 254 million yuan in 2020 to 355 million yuan in 2021, an increase of 39.8%. At present, the largest revenue segment of the company is the sale of model animals, followed by preclinical pharmacological efficacy evaluation and antibody development, which account for 30.3%, 29.8% and 25.0% of the company's revenue respectively. At present, no products have been approved for commercial sales and income. According to the geographical location of customers, the vast majority of the company's revenue is contributed by Chinese customers, accounting for 61.8% of the 2021 revenue. In terms of gross profit margin, it increased from 65.9% in 2020 to 69.8% in 2021, mainly due to changes in business structure and an increase in gross profit margin on model animal sales. In 2020, 2021 and up to April 30, 2022, gene editing, preclinical pharmacological efficacy evaluation and model animal sales remained profitable as a whole, generating gross profits of 129 million yuan, 175 million yuan and 71 million yuan respectively. In terms of sales and marketing expenditure, the increase from 31.66 million yuan in 2020 to 42.03 million yuan in 2021 is mainly due to wage increases and the expansion of promotional activities. In terms of general and administrative expenses, the decrease from $245 million in 2020 to $188 million in 2021 is mainly due to the larger employee incentive scheme in 2020, which pays $127 million for shares.
In terms of R & D expenditure, it increased from 276 million yuan in 2020 to 558 million yuan in 2021, representing a growth rate of 102.1%. As the company continues to carry out preclinical research and development, clinical development, soliciting regulatory approval for candidate products, launching pipeline products and increasing manpower for business, it is estimated that R & D expenditure will continue to increase significantly in the next few years. As of December 31, the cash in the bank and in stock was 750 million yuan and 466 million yuan respectively. From the total comprehensive income of the annual ╱ period, the net loss of shareholders of the company is 475 million yuan in 2020, and the loss expanded to 545 million yuan in 2021.
Valuation level
We selected two Hong Kong stock companies with similar experimental animal model research and development and gene editing business: Genscript Biotech Corporation (1548.HK) and Zhaoyan New Drug (6127.SH). The average market-to-sales ratio of the industry in 2021 is about 22.84 times. The company's price-to-sales ratio is 28.22 times, and the company's market capitalization is HK $10 billion based on 397 million shares after the global public offering. The size of the company is smaller than that of the same industry, but the market-to-sales ratio is higher than the industry average. We think the company is overvalued.
The price stabilizer's track record this time the price stabilizer is Goldman Sachs Group, who has participated in a sponsor project since the beginning of 2022, and his performance has dropped on the first day.
Market atmosphere Hong Kong IPO market atmosphere was depressed in the first half of 2022, with a total of only 26 new shares listed, with a first-day failure rate of 53.9%, with an average first-day decline of-0.1%. The Hong Kong new stock market began to pick up in the second half of the year, with a total of 18 new shares listed, with the first-day failure rate still reaching 52.9%, with an average first-day increase of 5.0%. Although there is a pick-up in the Hong Kong new stock market and recent plate valuations have been repaired, due to the epidemic, inflation, supply chain disruption and other factors, Hong Kong stock valuations are still relatively historically low.
Cornerstone aspects of the introduction of Weike economy and trade, Rongchang biology, Sanjin International shares, QuantumPharm Inc. And Beijing Xingxing 5 institutions, assuming that the over-allotment option has not been exercised, the total subscription accounts for 71.14% of the total offering shares.
Purchase proposal
As the first company to land in Hong Kong, an innovative drug development enterprise driven by gene editing technology and mouse model has a strong market scarcity and has broad potential for future development. Driven by innovative technology, the company accelerates the "thousands of mice" program, and is expected to complete drug research and development of 1000 potential drug targets in the next 3-5 years. However, at present, the company has no commercialized drug products, and its income mainly depends on preclinical research services and antibody development. with the continuous increase of R & D investment, the loss of the company continues to expand.
The performance of the biotech sector of Hong Kong stocks is weak this year. In view of the current depressed market environment, investors have received a lukewarm response to unprofitable bio-pharmaceutical companies with no products, and their valuations are too high, so they have a comprehensive score of 60 points, with a rating of "neutral".
Risk hint
(1) failure of product research and development; (2) the company has not yet made a profit, and it is difficult to make a profit in the short term. (3) competitive risk.