On September 25, 2023, Tomoshibayo Bio-B (02496) was officially listed on the Hong Kong Stock Exchange. As a scarce target for dual resistance, it received a lot of investors' attention when it went public.

According to the Zhitong Finance App, during the IPO stage, Youzhiyou Biotech signed a cornerstone investment agreement with Optics Valley Health, Chu Xing You Rui, and Park Hwa Kaizhi. The three institutions jointly subscribed for 6.513,800 shares of the sale, with a subscription amount of about HK$106 million, accounting for 3.38% of the company's post-sale shares.

On the day after listing, Youzhibao Biotech closed up 21.5%, reflecting its “gold content” as a scarce target for Hong Kong stocks. However, when investors thought this was the beginning of a bioinnovative pharmaceutical company reaching its peak, they didn't expect everything to be over.

On September 27, after hurriedly reaching a peak of HK$19.8, Youzhibao Biotech began a “all the way down” model. From September 27 to October 3, the company's stock price experienced “four consecutive declines”. The lowest price reached HK$14.6, down 8.75% from the issue price of HK$16. Although the company successfully stopped falling and closed up on October 4, the trading volume on the same day was only 86,400 shares. After the trading volume fell below 100,000 shares, the stock trading volume of Tomohiba TOMOBIO never broke through the 100,000 shares level.

This also means that a week after listing, Youzhibao Biotech has already been “abandoned” by market funds. At this point, it is still nearly 6 months until the Cornerstone ban is lifted.

Stock prices are seriously diving, and the cornerstone of scarce stocks is hard to resist, duvet covers

In fact, from the perspective of the business and product market, Tomochiba Biotech's technical capabilities and commercialization prospects are still interesting.

The Zhitong Finance App learned that BsAb is an artificial protein that can identify and specifically bind to two antigens or epitopes, and can simultaneously block antigen/epitope-mediated biological function or make antigen cells bind more closely.

In recent years, due to people's deepening understanding of the pathogenesis of various diseases and the rapid development of therapeutic mAbs, the global BsAb market has grown rapidly. In 2021, the global BSab market reached $3.8 billion. With further breakthroughs in technology and clinical research, it is expected to further increase to $58.6 billion in 2030. In 2021, China's BSab market size is 100 million yuan (RMB, same below). It is expected to grow at a compound annual growth rate of 251.7% in the future, and is expected to reach 61.5 billion yuan by 2030.

Among them, M701, the core product of Youzhiyu Biotech, is a recombinant BsAb that targets cancer cells that express human epithelial cell adhesion molecule (EpCAM) and T cells that express human differentiation cluster 3 (CD3).

According to reports, M701 is Epcam×CD3 BsAb which focuses on the treatment of MA and MPE. The company completed a phase I clinical trial of M701 to treat malignant ascites (MA) in January 2022, and is currently conducting phase II clinical trials to evaluate the efficacy of M701 in combination with systemic treatment for patients with malignant ascites (MA). In addition, the company also conducted a phase IB/II clinical trial of M701 for the treatment of malignant pleural effusion (MPE) in China in November 2022.

According to the 2023 interim report data disclosed by Youzhibao Biotech, in the direction of malignant ascites (MA), Youzhibao Biotech is currently conducting phase II clinical trials to evaluate the efficacy of M701 monotherapy combined with systemic treatment (including targeted therapy, immunotherapy, or chemotherapy) in treating MA, and has observed good data. In the direction of malignant pleural effusion (MPE), Youzhiyou Biotech is currently conducting phase IB/II clinical trials of M701 to treat MPE in China, and has also observed good data.

However, at present, all of the core varieties of Youzhiyou Biotech are only in phase II clinical phase, and without the support of commercial products, their valuation is under huge pressure.

The Zhitong Finance App observed that after October of last year, the stock price of Youzhibao Biotech quickly dived. As of February 20 this year, the company's stock price was only HK$8.74, down 45.38% from the issue price. This is clearly far below the subscription price for Cornerstone Investors during the IPO stage. Today, it is only one month until the listing ban is lifted on March 24 this year.

This means that once the listing ban has been lifted, Youzhi YouBio needs to guarantee that the stock price is higher than HK$16 to ensure that the cornerstone investors do not lose money, but judging from the current internal situation and market environment of the company, it is extremely difficult.

Commercialization is far from being able to quench thirst

As mentioned above, judging from the current daily trading volume and turnover, Youzhi YouBio has fallen into a “liquidity trap” and has been forgotten by the market. The reason for this phenomenon is not only that it faces the problem of running out of cash, and it is difficult to support future commercialization expectations with core products and pipelines.

According to financial data, in 2021, 2022 and the first half of 2023, Youzhi YouBio's other revenue was 127.98 million yuan, 2.56 million yuan, and 6.919 million yuan respectively, lacking revenue from commercial products. At the same time, the company's net losses for the period were approximately RMB 149 million, RMB 189 million and RMB 86.568 million respectively, with a year-on-year increase of 27% in 2022. In response, Youzhibao Biotech admits that it was mainly affected by the increase in R&D expenses.

At present, financing and borrowing are the main ways to support the daily operations of Youzhibao Biotech.

The Zhitong Finance App observed that in 2021, 2022, and the first half of 2023, the net cash from Youzhibou Biotech's financing activities was 810.34 million yuan, 241 million yuan, and 49 million yuan respectively. Under these circumstances, its cash flow was only barely enough to support the current year's expenses. As of the end of June last year, there were only 76.445 million yuan left in cash and cash equivalents. Whether this cash flow can maintain operations and R&D in 2024 without continued financing is unknown.

However, as the core product of Youzhibao Biotech, the BLA application for M701 to treat malignant ascites (MA) will have to be submitted in the first quarter of 2025 according to the company's plan, which means that the company still needs continued financing before the product can be commercialized.

Furthermore, there is another practical question facing Youzhibao Biotech: Can commercialization of M701 achieve “hematopoiesis” for the company.

From a market perspective, according to Frost & Sullivan statistics, the market size of MA therapy in China is expected to increase from 10.7 billion yuan in 2021 to 12.4 billion yuan in 2025 and 14.7 billion yuan in 2030, while the market size of MPE therapy in China is expected to increase from 11.6 billion yuan in 2021 to 13.2 billion yuan in 2025 and 15.3 billion yuan in 2030

Although both domestic MA therapy and MPE therapy are likely to form a 10 billion market in the future, since MA and MPE are often associated with malignant tumors in multiple organs with poor prognosis, advanced cancer patients rarely benefit from marketed drugs, and there are few drug candidates approved to treat MA and MPE.

Take the domestic market as an example. Currently, no domestic chemotherapy, immunosuppressants, or anti-angiogenic drugs have been approved by the State Drug Administration for the treatment of MA or MPE, and no drugs have been included in the recommendations of the Chinese MA or MPE clinical guidelines. This makes it difficult for the domestic MA and MPE therapy market to develop in the optimistic direction of market estimates.

Obviously, it is difficult for investors to bet on a “hopeless” company, and under the double impact of shrinking market capitalization and liquidity difficulties, even if it has the aura of “Hong Kong stocks fighting against scarce targets,” it will inevitably disappear from investors' eyes.