On April 29, Zhaoke Ophthalmology listed its shares in Hong Kong at a price of HK $16.8 and closed at HK $14.32 on its first day of trading.

With the aggravation of aging, the change of people's life style and the rising proportion of myopia among teenagers, ophthalmology has gradually become the "darling" sought after by capital in recent years.

Ophthalmology may become the next ideal track in the field of biomedicine.

In July 2020, Oakangwei Vision, an ophthalmology innovation drug company, went public in Hong Kong, with the halo of "number one ophthalmologist". IPO rose by 152% on the same day.

The time line is even longer. Oppkangshi, the first stock of optometry technology, has made great progress in the secondary market since it landed in A shares in 2017; it has been on the market for more than a decade, known as "ophthalmology Maotai" Aier ophthalmology, and has maintained a trend of continuous growth.

Under the background of the great popularity of the ophthalmology track, the ophthalmology pharmaceutical company Mega Ophthalmology was once favored by the market, carrying the expectation of replicating the success of Oppkangshi.

However, its first day on the market was broken, coupled with the highly speculative nature of investment in drug development, which requires a lot of upfront capital expenditure, and the commercialization path is still being explored. In the face of these risks, what is the future of Mega Ophthalmology after listing?

Backed by Hillhouse Capital and Ayre Ophthalmology, the shareholder lineup is strong.

Zhaoke Ophthalmology was founded in 2017 and was spun off and listed by Li's Pharmaceutical Co., Ltd. to position the ophthalmology company and devote itself to the research, development and commercialization of therapy.

According to SkyEye data, before IPO, Mega Ophthalmology conducted a round of strategic financing of US $145 million, with investors including Ayre Ophthalmology, Hillhouse Capital, TPG, Zhengxin Valley Capital and other well-known investors.

Before IPO, Wealthy Chance held 3.1% of Magi Coyote's shares, 17.3% of which was held by Magi Panacea, 8.1% of which was held by Personality, 7.6% of which was held by Wealthy Chance entities, 3.2% of which was held by Magi.

HH COFL is 7.4% owned by Hillhouse Capital, and 33.6% directly owned by Li's Big Pharmaceutical Co., and 7.4% by Asia.

Zhengxingu holds 4% of the shares, while OrbiMed holds 2.7% of the shares and Ayre holds 3% of the shares.

Upon completion of the global offering, Lee Pharmaceutical International and Coyote will hold about 25.8 per cent and 13.3 per cent of the total issued share capital of Mega Ophthalmology respectively. After listing, Li Da Pharmaceutical International and Coyote will become major shareholders of Mega Ophthalmology.

In terms of historical financing, Mega Ophthalmology's B-round valuation has reached US $470 million, or about HK $3.646 billion.

It is worth noting that the eight cornerstone investors of Zhaoke Ophthalmology account for 21.54% according to the median pricing, and a number of well-known institutions, such as Aobo Capital and GIC, enter the market, although they rely on the star cornerstone, but the proportion is small, setting a new low in the proportion of IPO cornerstone of Class B pharmaceutical companies, which reflects the caution of cornerstone investors.

Since 2020, he's Ophthalmology, Huaxia Ophthalmology, Puri Ophthalmology and other private ophthalmology hospitals have gathered together to sprint IPO, and the upstream ophthalmology medicine field has ushered in a trend of listing, but at present, none of the three have landed.

Diversified product mix and uncertain commercial prospects

As an innovative R & D company born out of an established traditional pharmaceutical company, the company's products include innovative drugs and generic drugs.

Through self-development or licensed introduction, Mega Ophthalmology has established a comprehensive ophthalmic drug pipeline containing 25 drug candidates, covering most major ophthalmic indications affecting the anterior and posterior segments of the eye.

The ophthalmic drug market in China is relatively scattered, and there is a lack of companies that focus on ophthalmology and have the intention and ability to solve this professional field systematically. For most market participants, ophthalmic drug assets account for only a small portion of their business.

Only a few companies have combinations of drugs that affect major eye diseases in the front and back of the eye, most of which are multinationals.

When designing the product pipeline, Mega Ophthalmology's strategy focuses on the five major ophthalmic indications in China, including dry eye, wet age-related macular degeneration, diabetic macular edema, myopia and glaucoma.

Obviously, Zhaoke Ophthalmology hopes to establish a competitive advantage with the help of a variety of product lines.

However, Zhaoke ophthalmology products are basically in the early stages of research and development and clinical testing, and only one product is expected to be commercialized by the end of 2021-cyclosporine An eye gel, an innovative drug for the treatment of xerophthalmia.

At present, the number of people affected by xerophthalmia in China is nearly 300 million, and the market space is huge. With the commercialization of cyclosporine An eye gel, it is expected to bring continuous cash flow to the company.

However, the competitive environment of this drug is not optimistic. Its target product, Restasis2, has been on the market all over the world in 2003, and Zirun, a similar product of Xingqi eye medicine, has also been listed in 2020. In addition, there are followers in the market, such as platinum medicine, Hengrui medicine, unknown medicine and so on. By contrast, the progress of Zhaoke ophthalmology is not fast.

Even with the backing of "star" shareholders and cornerstone investors, the commercialization of Zhaoke Ophthalmology has been somewhat difficult. At present, the company does not have any products approved for commercial sale and does not generate any revenue from product sales.

According to the prospectus, the company made no profit and incurred an operating loss for the year ended 31 December 2019 and 2020, with a net loss of RMB 122.1 million and RMB 727 million.

The expenditure on research and development of mega ophthalmology has shown a decreasing trend in the past two years. Its R & D expenditure was 93.4 million yuan in 2019 and reduced to 81.8 million yuan in 2020. However, according to the company's financial data, the decreasing R & D expenditure accounts for a relatively small proportion of the total loss.

Zhaoke Ophthalmology believes that the loss is due to R & D expenses and financial costs. it also said that as the company will continue to conduct preclinical research and development, clinical development and seek regulatory approval for drug candidates, commercialize pipeline products and increase staff to support the above work, it is expected to incur significant expenses and operating losses in at least the next few years.

The head of Zhaoke Ophthalmology told Lianyun.com that the progress of product development and commercialization will indeed affect the company's stock price fluctuations after listing, but the listing is a new starting point for Zhaoke, and the company still maintains confidence in its future development.

Is the spring in the ophthalmic medicine market coming?

Eye disease not only places a heavy burden on the global health system, but also brings some opportunities for related fields.

In 2019, the prevalence rate of eye diseases in China is significantly higher than that in the United States under the same conditions, but the size of China's ophthalmic drug market is only 1/6 of that in the United States, which shows that there is a huge gap in the medical demand for ophthalmic drugs in China. The gap also means that the market potential is huge.

There has always been a saying in the field of medical investment that "gold eyes, silver teeth and bronze bones". With the continuous improvement of living standards and public awareness of vision care, it is expected that the demand for eye care in China will continue to grow.

Ophthalmology is divided into three parts: main ophthalmic medicine, ophthalmic instruments and ophthalmic medicine. According to the Frost & Sullivan report, the overall size of China's ophthalmology market reached 170 billion yuan in 2019, of which ophthalmology services market 124 billion, accounting for 73 percent; ophthalmology equipment market 26.7 billion, accounting for 16 percent; ophthalmology medicine market 19.3 billion, accounting for 11 percent.

In the huge ophthalmology market, China's ophthalmology drug market is in its infancy and accounts for a small proportion. However, it is worth noting that the growth rate of the ophthalmic drug market is worth looking forward to.

According to the Zhaoke Ophthalmology prospectus, the market size of ophthalmic drugs in China has increased from US $1.8 billion in 2015 to US $2.6 billion in 2019, and is expected to grow further from 18.6% in 2019 to US $7.2 billion in 2025 and from 22.9% in 2025 to US $20.2 billion in 2030, exceeding the growth of the global ophthalmic drug market in the same period.

China has the largest number of ophthalmopathy patients in the world, while the two major tracks of ophthalmic equipment and ophthalmology pharmaceuticals are in the ascendant, and many listed or non-listed companies have begun to step up their research and development efforts to seize a huge domestic alternative space.

Although the market is hot, it does not mean that every company on the track can take off in the tuyere of industry development. On April 16 this year, when Zhaoke Ophthalmology launched its initial public offering, the share price of Li's big pharmaceutical company, its parent company, plummeted.

With its strong cornerstone and good track, Zhaoke Ophthalmology has been sought after by capital. But it will take time to see whether Mega Ophthalmology can support a market capitalization of more than HK $7.8 billion or replicate the success of Ojai Vision with existing innovative drugs that are still in the clinical stage.