Investment highlights:

Medical team of the star lineup:Dr. Cui Jiansong and Dr. Zhao Renbin, two executive directors, have worked in the world's top pharmaceutical companies for many years and held related positions such as chief scientist. Dr. Shi Yigong, the spouse of Dr. Zhao Renbin, is also a non-executive director of Nuocheng Jianhua.

Blockbuster track PTKInhibitors:In the field of PTK inhibitors in the treatment of B-cell non-Hodgkin's lymphoma, only ibutini (co-owned by Abervir / Johnson & Johnson) and acatinib (AstraZeneca PLC) are currently on the market. Zabutinib (BeiGene, Ltd. 's BTK inhibitor) passed FDA in 2019 and is expected to be officially launched in 2020 or 2021. According to the Frost & Sullivan report, the global market for PTK inhibitors in 2018 was US $4.5 billion (31.5 billion yuan), of which ibutini accounted for 99%. As more subdivided indications in the field of lymphoma such as FL follicular tumors are certified by FDA and CFDA, the market for PTK inhibitors will continue to expand. According to Frost & Sullivan, the market for PTK inhibitors will reach US $23.5 billion (164.5 billion yuan) in 2030.

Obutini advantages:1) the overall efficacy of Obutini in Nuocheng Jianhua is better than that of Ibutini, which is close to that of zebutini; 2) the safety factor of Obutini is significantly better than that of Ibutini and Zabutinib, and the target of the drug is more accurate, and the incidence of side effects such as massive hemorrhage, infection and secondary malignant tumor is the lowest among all BTK inhibitors; 3) of all BTK inhibitors, Obutinib has the lowest probability of miss target and the lowest medicinal dose.

The product line under research is rich:At present, the company has five candidate drugs, such as Obutini, ICP-192 and ICP-105, which are distributed in different stages of research and development, which reduces the risk of relying on a single drug source of income and ensures the sustainable development of the company.

Text:

一、Company introduction:

二、The development of the company:

November 2015-the company is officially established

August 2018-InnoCare established and operated in Guangzhou

October 2019-Obutini completes phase II clinical trials and begins phase III clinical trials lasting about 2-3 years.

2020年03月-Hong Kong Stock Exchange is officially listed

Note: IND is a clinical approval application, and only after IND approval can phase I-III clinical trials be conducted.

CDE is the drug evaluation center of the State Food and Drug Administration.

三、The structure of shareholders and the organizational structure of shareholders and senior management:

In the equity structureDr. Zhao Renbin and his family membersThe total shareholding is 15.43%, and the co-founder, chairman and president, Dr. Cui Jiansong, and family members hold a total of 11.45%. According to the prospectus, Cui Yisong and Zhao Renbin are the actual controllers of Nuocheng Jianhua.

注：Shi YigongAlthough he does not hold any shares in the company, Dr. Zhao Renbin is the wife of Dr. Shi Yigong.

Nuocheng Jianhua can be said to be a star lineup in Chinese medical circles. The two actual controllers, Dr. Cui Jiansong and Dr. Zhao Renbin, have worked in the world's top pharmaceutical companies. Dr. Cui Jiansong has worked at Merck & Co Inc (ranked fifth in the world) for nearly 15 years. Dr. Zhao Renbin served as chief scientist at Johnson & Johnson (ranked fourth in the world).

Dr. Shi Yigong is a non-executive director of Nuocheng Jianhua Co., Ltd. Dr. Shi is a famous person in the Chinese scientific community, such as vice president of Tsinghua University, academician of the Chinese Academy of Sciences, foreign academician of American scientists, etc. Many years ago, he gave a public speech, "what was the last straw that killed the camel?" Is to encourage scientists to set up enterprises "into the public eye." In 2018, he established West Lake University with reference to the school-running ideas of California Institute of Technology and Stanford University, recruiting only PhDs.

(note: non-executive directors do not belong to the company managers to hold daily duties, but only play the role of independent third-party supervision, inspection and balance to the executive directors in the board of directors, safeguarding the public interest and the rights and interests of minority shareholders. Therefore, Dr. Shi does not participate in the business and company management of Nuocheng Jianhua, but his spouse, Dr. Zhao Renbin, is the actual controller of Nuocheng Jianhua, and Dr. Zhao Renbin and his family members are the second largest shareholders of the company. )

四、Core product analysis:

Because most of Nuocheng Jianhua's innovative drug research and development is in the clinical phase I, only the BTK inhibitor of osbutini is in the clinical II phase, and entered the clinical III phase at the end of 2019.

According to the success probability of global clinical trials, the probability of new drugs that can successfully pass the clinical phase II is only 26%, and the phase II trial takes 2.9 years. ICP-192 and ICP-105 have great uncertainty and high failure rate. So, next we will only talk about Obutini, which has just started a clinical phase III trial, and the current indications for this drug are as follows:

Note: a drug can have multiple indications at the same time, as long as it contains a target and responds to the drug.

After passing the clinical phase I, we can enter the clinical II phase, and through the clinical phase II, we can enter the clinical III phase.

1） Obutini introduces:

Obutini belongs toBTKInhibitorFocus on B-cell lymphoma. BTK is a kind of酶Bruton tyrosine kinase, a very important signal molecule, can be expressed in all stages of B lymphocyte development. But after B lymphocytes become cancerous, the enzyme becomes abnormally active at the same time. Therefore, Obutini is a BTK inhibitor that inhibits the activity of this enzyme, thereby inhibiting the crazy growth of cancer cells.

(note: cancer cells can proliferate indefinitely without restriction and destroy normal cell tissue; B cells belong to human immune cells.)

Note: the red box is the indication in Nuocheng Jianhua III trial, which will continue to be expanded in the future.

2） Introduction to lymphoma:

In fact, lymphoma is not so difficult to treat as we think, only a small number of malignant lymphomas are difficult to treat. For example, the 5-year survival rate of HL Hodgkin's lymphoma is as high as 85%, and the 5-year survival rate of DLBCL diffuse large B lymphoma in NHL non-Hodgkin's lymphoma is more than 58%. The effect of rituximab is significant, which greatly improves the survival rate of patients.

(note: cancer is easy to relapse and metastasis in the first 5 years after treatment. If there is no recurrence and metastasis within 5 years, the probability of recurrence is very low. It is considered that the clinical cure effect has been achieved. )

In addition, lymphoma generally does not do surgical resection, the main treatment methods are chemotherapy, radiotherapy, targeted drugs, immunotherapy, bone marrow metastasis and so on. Reasons: a) the lymphatic system is spread all over the body and is not easy to remove; b) chemotherapy, targeted drugs and immunotherapy are effective; 3) Lymphoma is an immune system disease, surgery will make the patient's immunity lower.

There are more than 70 subtypes of NHL non-Hodgkin's lymphoma.China ranks top three(red box)DLBCLDiffuse big BLymphoma, MZLMarginal zone lymphoma, FLFollicular lymphomaAmong them, DLBCL diffuse large B lymphoma accounts for 40% of NHL non-Hodgkin's lymphoma. However, Nuocheng Jianhua's Obutini drugs currently have indications for phase III (dark green box) MCL mantle cell lymphoma (5% CLL 6%), CLL chronic lymphocytic leukemia, SLL small lymphocytic leukemia.

注：

Kaifu Lee suffered from follicular lymphoma, which is common in China at that time. The progression of this lymphoma is very slow. The 5-year survival rate of rituximab (or Atozumab) can reach 80%. Rituximab was listed in China in 2000 and entered the national health insurance catalogue in 2017.

3) BTKMarket size of inhibitors:

A) number of patients:According to the 2017 China Cancer report, lymphoma accounts for 2.21% of the top 10 malignant tumors, and the mortality rate is 1.81%. In China, there are 100000 new cases of lymphatic cancer, 85000 cases of non-Hodgkin's lymphoma, 38000 new cases of diffuse large B lymphocytes, 4600 new cases of MCL mantle cell lymphoma, and 4600 new cases of CLL chronic lymphocytic leukemia and SLL small lymphocytic leukemia.Therefore, Nuocheng Jianhua's target patients in China in the short term are about1About ten thousand people.

Note: there are 730000 new cases of lung cancer in China every year, with high morbidity and mortality.

B) Market size of BTK inhibitors:Rapid volume release has been achieved since the launch of the first BTK inhibitor ibutenil (Johnson & Johnson / Abowei) in 2014. According to the Frost & Sullivan report2018Year BTKGlobal sales of inhibitors 45Us $100 million (315100 million yuan)Ibutini accounted for 99% of the global market share. With a global size of US $23.5 billion (164.5 billion yuan) in 2030, China's market size will be US $2.6 billion (18.2 billion yuan) in 2030, accounting for 11.1% of the global market share.

(note: China's innovative drug leader Hengrui Pharmaceutical has a revenue of 17.42 billion yuan in 2018, and the annual sales revenue of Ibutini is equivalent to that of two Hengrui Pharmaceuticals.)

Note: Ibutini passed China's CFDA certification in 2017, with a price of 50,000 yuan per box (90 tablets), and entered the national health insurance at the end of 2018 at 7000 yuan per box, so sales of BTK inhibitors began to be sold in China in 2019.

4) Obutini (BTKInhibitor) market competition:

At present, there are two innovative drugs for BTK inhibitors on the market: one is ibutini, which is jointly owned by Abowei and Johnson & Johnson, and the other is acatinib developed by AstraZeneca PLC. In addition, the third competitor to be born is BeiGene, Ltd., who has a large position in Hillhouse Capital. Zebutini passed the FDA certification in the United States at the end of 2019 and will launch in 2020 / 2021.

According to the chart below, Nuocheng Jianhua's real competitors will be Ibutini and Zebutini, and other potential competitors PTK inhibitors have few indications and do not coincide with those of Obutini. There are few indications approved by acartini, and there are few clinical trials of other indications, so it is difficult to pose a threat to obutini.

Note: it is clear that Obutini is not suitable for cGVHD, FL and B-HNL.

According to the chart below, zabutinib (BeiGene, Ltd.) or Obutinib (Nuocheng Jianhua) is expected to be the most effective product in the field of PTK inhibitors in the field of MCL sleeve cell tumor. In the field of MW Fahrenheit macroglobulin, zabutinib (BeiGene, Ltd.) is still expected to become best-in-class (Obutinib has not yet released relevant clinical data). But in the field of CLL/SLL, it is Ibutini.

Note: First-in-class is the first of its kind (first listed), and Best-in-class is the best of its kind (the best effect)

ORR (ORR=CR+PR) is the percentage of patients whose tumors have shrunk to a certain amount and maintained for a certain period of time (mainly for solid tumors).

CR (Complete Response) is complete remission, PR is partial remission (Partial Response)

We all know that all our malignant tumor cells can be eliminated without considering the bearing capacity of the body. For example, chemotherapy drugs can destroy cancer cells on a large scale, but also destroy normal cells in the human body on a large scale, which is the result of why we think that chemotherapy is ineffective. Therefore, under the premise of considering the efficacy, the safety of the drug is also our key consideration. According to the figure below, the safety factor of Obutini is the highest, the drug has lower miss ability and fewer side effects.

Note: red dots mean that enzymes in our bodies react to BTK inhibitors. More red dots mean that PTK inhibitors respond to more kinds of kinases, so side effects are more obvious such as diarrhea, infection, massive bleeding and so on.

五、Financial analysis and use of funds:

1) Financial analysis:

Nuocheng Jianhua is still on medication.Research and development stage(the R & D cost is the highest), no product sales generate any revenue. Therefore, the company's main cost structure is mainly R & D costs and administrative expenses.

Note: revenue refers to the R & D services provided by Nuocheng Jianhua (including Obutinib, ICP-192, ICP-105 Technology Frontier) to other biopharmaceutical companies.

2) the purpose of raising funds:

In the future, the company will continue to increase R & D expenditure, mainly for clinical development of drugs under research, seeking regulatory approval for drug candidates, manufacturing drugs under research, launching pipeline products, and recruiting necessary personnel (R & D staff, 80-90 sales staff). At present, a production facility covering an area of 50,000 square meters is being built in Guangzhou for mass production. The annual production capacity is estimated to be 1 billion tablets, and Q4 is expected to be completed and put into use in 2020.

六、Product line under development:

At present, the company has discovered and developed five drug candidates with the potential to become the best of its kind or initiative, such as obutinib, ICP-192 and ICP-105, which reduces the risk of relying on a single drug source of income and ensures the company's sustainable development in the future.

注：

The indication of ICP-192 is cancer of the periphery of the liver, which is very aggressive. At present, there is no drug to treat it. It can only be detected and resected early, otherwise it will be regarded as an incurable disease.

The indication of ICP-105 is HCC hepatocellular carcinoma, which is the fourth highest incidence cancer in China. And HCC hepatocellular carcinoma is the most common type of liver cancer and is also regarded as one of the deadliest cancers. HCC is usually found in patients with chronic hepatitis.

7. Risk hints:

1) the period of innovative drug investment is long, the capital is large and the uncertainty is high.

2) Nuocheng Jianhua mainly focuses on the first drug and the best drug of the same kind, so entering more unknown areas, the failure rate will be higher than that of the same industry.