Since the beginning of the year, it has become a market consensus that the overall valuation of the Hong Kong biomedical sector has gradually bottomed out in the midst of continuous fluctuations, but considering that policies, fundamentals, and liquidity are all expected to show an improvement trend in the second half of the year, the current innovative drug sector, especially differentiated innovative pharmaceutical companies with faster demand growth and a better competitive pattern, may welcome opportunities on the left side.

This is the main reason why Callie Biotech has received both the attention of the market and the industry. The scarcity of Cali Biotech is reflected in the fact that compared to the current biotech companies in the biomedical sector of the Hong Kong stock market that are piling up to develop immune checkpoint inhibitors, Cali Biotech's field of expertise is mainly focused on post-operative pain management.

For a long time, on the hot innovative drug circuit, Hong Kong stock investors were only able to select the best from research targets such as tumors and self-exempt drugs, but they were unable to touch the research targets of post-operative pain management drugs that are also developing rapidly. After Cali Biotech successfully lands in the Hong Kong stock market, the company will become the only innovative pharmaceutical company in the Hong Kong stock market focusing on post-operative pain management, filling the investment gap in the Hong Kong market.

According to the prospectus, as a leader in the global ropivacaine long-acting injection product circuit, CPL-01, the core product of Galli Biotech, has now entered phase III clinical trials in both China and the US, and commercialization certainty is high. In the future, the company's core competitiveness will also be reflected in its core technology platform and the commercialization potential of major product pipelines.

It is worth mentioning that the star shareholder group of Cali Biotech includes well-known pharmaceutical companies and high-quality investment institutions such as Dongyangguang, Wantong Pharmaceutical, and Liqin Resources. Previously, the company also received capital increases from shareholders, which shows that the company's shareholders are optimistic about the future development of Cali Biotech. As the company continues to work hard on the post-operative pain management circuit, the certainty of future growth will gradually increase, and the medium- to long-term investment value will continue to increase.

Expectations for commercialization of core products continue to rise

Thanks to its long-term focus on the post-operative pain management market, Gary Biotech has now grown into a leading domestic participant in this scarce segment. However, the core reason the capital market favors Caltech is that the company has a stable and high-quality main business, as well as high product commercialization expectations and growth certainty.

CPL-01, the core product of Galli Biotech, is currently the leader in the global racetrack of long-acting ropivacaine injection products.

According to the previously disclosed US phase IIa clinical trial (NCT04182880) results, CPL-01 is well tolerated, has no serious adverse effects, no local narcotic systemic toxicity (LAST), and has no effect on local tissue and wound healing. CPL-01 showed no negative effects on clinical laboratory results, vital signs, and ECG. Systemic PK results showed that CPL-01 showed characteristics of slow release and that this characteristic was consistent with the expected extension of analgesia time.

Compared with traditional lopivacaine, CPL-01 developed through PG-Depot, a Gary biotech platform, can last for several days after a single topical dose, and has significant differentiating advantages.

Judging from the latest research and development progress, Gary Biotech conducted CPL-01 phase III clinical trials of open inguinal hernia repair surgery and bunion resection in April and May of this year. Up to now, the company has arranged for 20 and 10 patients to join the CPL-01 phase III clinical trial of open inguinal hernia repair surgery and bunion resection, respectively. In addition, the company also submitted a phase III clinical trial plan to China's State Drug Administration in March of this year, and obtained approval from the State Drug Administration's CDE for CPL-01 phase III clinical trials in China in June.

Currently, Cali Biotech's R&D teams in China and the US are in place, and the R&D process is progressing rapidly.

From a market perspective, judging from the market prospects of long-acting ropivacaine injections, according to the drug application schedule, it is estimated that the first long-acting ropivacaine injection for post-operative analgesia may be approved in China in 2024. In 2024-2030, the potential market size of long-acting ropivacaine injections for post-operative analgesia in China is expected to increase from RMB 178 million to RMB 741 million, with a CAGR of 26.8%.

However, there are currently no long-acting lopivacaine analgesics approved for marketing in the world. As for the race track to develop novel ropivacaine formulations, Gal Biotech is currently at the forefront, has a large first-mover advantage, and is expected to quickly occupy a high position in the market after being approved for marketing in the future.

On the one hand, because CPL-01 is an improved new drug, it has advantages in the development process, cost, and success rate. Therefore, CPL-01, which has entered phase III clinical trials, is significantly higher in terms of R&D success rate and certainty of future commercialization.

On the other hand, in addition to having leading R&D progress and success rate, in terms of the product's market attributes, since post-operative pain management involves a wide range of scenarios, hospital customers are highly sticky, have both medical and consumer attributes to a certain extent, and are not affected by medical insurance fee control, so they are part of the blue ocean market, and high-tech products have high market growth room.

It is for this reason that, compared to traditional innovative drugs, CPL-01 has the potential to enter the commercialization stage faster, and is expected to become the world's first long-acting ropivacaine injection.

The continuous release of intrinsic value has been recognized by investors

The commercialization of the core product CPL-01 is imminent. The company's post-operative pain management product pipeline research and development has made comprehensive progress. Combined with the advantages that the company is about to enter the Hong Kong stock market, there is no doubt that the market is looking more forward to Callix Biotech, a “unicorn” company in the field of post-operative pain management.

Meanwhile, at the critical point of the company's IPO, Caltech also contributed to the company's listing and subsequent commercialization channels by introducing important investors.

Judging from the current shareholding structure of the company, as of the last practical date, Mr. Lin held 50.83% of the shares through his wholly-owned investment holding company CaliNova, making him the company's largest shareholder. The main reason for strengthening equity through CaliNova is that it itself has sufficient cash investment capacity, can continue to pour blood into R&D companies, and avoid the dilemma of tight cash flow like other 18A companies.

In addition, the company has also brought in a number of major shareholders, including Dongyangguang (Dashan), Wantong Pharmaceutical (Hangbang), and Liqin Resources (Powerstone), and the Zhitong Finance App learned from news from the market that these star shareholders' groups are expected to continue to increase their holdings after the company's IPO. This undoubtedly highlights the company's shareholders' optimism about Cali Biotech's future development.

According to information from the Zhitong Finance App, Dongyang, as a leading pharmaceutical company in the industry, has a high-quality and efficient modern pharmaceutical research and development system and a huge pharmaceutical distribution network.

The imminent commercialization of Cali Biotech's core products and the introduction of a major investment in Dongyangguang at a key point in the IPO indicates that the deep strategic cooperation between the two sides may mainly focus on commercializing Cali Biotech's core products and the subsequent innovative research and development pipeline for post-operative pain management.

Another shareholder, Wantong Pharmaceutical's empowerment of Cali Biotech, is reflected in the pharmaceutical distribution level. At present, Wantong Pharmaceutical has set up a nationwide sales network covering 31 provinces, 333 prefecture-level cities, and 2,851 counties across the country, and has set up seven major business divisions, covering various channels such as commerce, terminals, chains, and medical care. Relying on a strong sales strategy, Wantong can provide consumers with more than 600 million boxes of products every year. It only takes a week from the time the company leaves the warehouse to rapid delivery of new products.

Empowered by Dongyang Pharmaceutical's strong pharmaceutical R&D and commercialization capabilities and Wantong Pharmaceutical's pharmaceutical logistics capabilities, its commercialization capabilities are expected to directly affect the future commercialization process of Cali Biotech CPL-01, helping CPL-01 quickly complete multi-level coverage in hospitals at all levels in China after its launch, benefiting a wider range of Chinese patients. However, through strong alliances, Cali Biotech will undoubtedly be able to speed up monetization capabilities and quickly seize the high ground in the domestic post-operative pain management market.

Meanwhile, the empowerment of Liqin Investment to companies may reflect the level of investment and financing. As a company with the entire nickel industry chain, it is backed by Liqin Resources, which has now completed the vertical integration of the nickel industry chain, and its products are widely used in downstream fields such as new energy vehicles and the stainless steel industry. According to the data, as of 2022, the company's revenue reached 18.29 billion yuan, an increase of 46.9% over the previous year. In the future, Liqin Investment is expected to actively participate in Callie Biotech's subsequent investment and financing activities as a financial investor, help the company's BD and commercialization, and provide an important guarantee for Callie Biotech.

Shifting from academic achievements to industrialization, successfully reducing costs, and achieving sustainable, large-scale development and commercialization have always been essential issues facing enterprise development. Currently, the core product CPL-01 has entered phase III clinical trials, and commercialization is imminent.

Compared to most companies in the Hong Kong biomedical sector that have yet to commercialize their products, Caltech clearly has a wider corporate moat and is more resilient to risks. It also shows that the company's internal value space continues to grow strongly. Currently, it takes time to verify the medium- to long-term value of Cali Biotech. As core products are implemented and domestic commercialization becomes more mature, the company will surely be able to further open the valuation ceiling and enjoy the valuation premiums of leading innovative post-operative pain management stocks.