"Seven or eight years ago, we chose the JV (joint venture) incubation model to establish Weisheng Pharmaceutical." said Fu Shan, managing partner of Weisheng Capital, "Looking at it today, this path is suitable for the development of Weisheng Pharmaceutical; excellent products require outstanding teams to spend time focusing on cultivation, and Weisheng has achieved results."
On March 21, Weisheng Pharmaceutical was officially listed on the Hong Kong Stock Exchange, attracting high-profile cornerstone investors. In addition to Weisheng Capital, which incubated Weisheng Pharmaceutical and increased its stake, the Suzhou Industrial Park Industry Investment Fund also made a significant contribution, along with two industry capitals, Anhui Anke Biotechnology and WUXI BIO.
Moreover, Weisheng Pharmaceutical's IPO set multiple records: the public offering was oversubscribed more than 70 times, making it the highest oversubscription ratio for an 18A listed company since September 2021; it is also the first company in the Hong Kong market to introduce and fully expand the scale adjustment option in medical health IPOs.
Weisheng Pharmaceutical is ushering in a glorious moment for its IPO, supported by a strong industrial foundation. The BLA application of the potential blockbuster product Longpei Growth Hormone was accepted a year before this IPO and is expected to become a cross-generational product of long-acting growth hormone. It is even more noteworthy that the unique "JV incubation model" behind the growth of Weisheng Pharmaceutical.
Unlike the typical License-in model, Weisheng Capital, in collaboration with the invested company Denmark's Ascendis Pharma, established Weisheng Pharmaceutical and granted Weisheng Pharmaceutical exclusive rights to develop, produce, and commercialize its three endocrine products in Greater China. Weisheng Pharmaceutical then issued 40 million USD series A preferred shares to Ascendis Pharma in exchange for equity, thus establishing a blood alliance with aligned interests to promote milestone goal achievement.
Why choose this model to incubate Weisheng Pharmaceutical? What are the underlying considerations of the industry beyond capital?
Taking advantage of Weisheng Pharmaceutical's listing on the Hong Kong stock market, the medical cube Invest interviewed Fu Shan, the controlling shareholder and cornerstone investor of Weisheng Pharmaceutical—managing partner of Weisheng Capital. Through these questions, insights into the complexities of the biomedical investment model's changes and constants were gained.
JV incubation in the CSI Leading Industry Index.
In 2018, Weigh Wu Capital single-handedly incubated Weisheng Pharmaceutical: Ascendis Pharma is indeed a portfolio company of Weigh Wu Capital in Europe and America. The established dollar Medical Fund Weigh Wu Capital bridged the gap, where the seller provided the product and the buyer contributed equity, to establish financing and introduce resources through a JV incubation model to bring high-quality overseas Assets.
At that time, with the opening of Hong Kong Stock Connect 18A and the Star Board, the path to listing gradually became clear, and the license-in model quickly became popular in China's Biomedical investment circle. However, Weigh Wu Capital, which has delved into Global Biomedical investment for years, chose a differentiated path: sensing the hidden irrationality in the capital boom, it turned to focus on identifying or incubating Innovative Drugs companies with commercialization potential and low technical risk, and through product or technology rights shareholding, co-founded joint ventures with stronger risk resistance to achieve localized Operation in the target market.
The advantages of this model are: on one hand, it avoids operational risks arising from being in a high R&D investment period and not yet profitable; on the other hand, it weakens reliance on Capital Markets, reduces potential pressure caused by market fluctuations. It is also thanks to this model that Weisheng Pharmaceutical maintained a relatively stable and rapid development pace even in the early stages of establishment amid a cyclical backdrop of a capital market that returned from its high point and long-term downturn.
Specifically, due to no milestone payments required, after completing the pivotal Phase III trial of Long Pei Growth Factor for treatment of Pediatric Growth Hormone Deficiency (PGHD) in 2022, Weisheng Pharmaceutical was able to ride the wave in 2023, consecutively completing the double-blind Phase III pivotal trial for Parolepitatide in China, as well as the Phase II clinical trial of Navapitatide for the treatment of achondroplasia in China.
This means that, after only one financing since its establishment, Weisheng Pharmaceutical not only quickly reached the pivotal milestones of all three core products but also left room to advance the application for the listing and formulation supply of the core product Long Pei Growth Factor, breaking out of the deadlock of 'difficult self-commercialization without going public' and smoothly marching towards the goal of 'becoming the leading Biopharma in the field of endocrinology in China.'
Fushan's flexibility and foresight stem from his insight into the complementary demand that has always existed between Asian and Western medical health markets, where the Asian market is a typical high-growth market, while the Western market possesses rich and advanced applicable technologies. The organic combination of the two allows Weigh Wu Capital to continuously capture growth opportunities in the pharmaceutical field.
The innovation in biopharmaceutical technology in the West is leading and needs to recover high R&D investments through internationalization; in contrast, the demand in China is experiencing upgrades that need to address unmet clinical needs, providing a wide application space for Innovative technologies. This is a state of bidirectional effort." Fushan stated.
It is precisely this phenomenon that led Fushan and Weigu Capital to focus on the rapidly growing Chinese market - "Investing in China is investing in the future." This aligns well with his consistent investment logic of using advanced applicable technology to meet the greatest market demand.
Focusing on the markets that are "not fully satisfied and not fully competitive."
As Fushan stated, Weigu Capital decided to acquire three products from Ascendis Pharma through the JV incubation model because it recognized the enormous unmet clinical needs and high growth trends in China's pediatric growth hormone market.
"In 2018, the market for growth hormones in China wasn't as large, but we observed that, on one hand, the proportion of children with dwarfism is fixed at 3%, and the treatment penetration rate for these patients in China is very low. On the other hand, Asians, especially Chinese, pay much more attention to height than those overseas. So we determine that the growth in this market in China will certainly outpace that in Europe and the USA, especially in the pediatric growth hormone market. Additionally, the Chinese growth hormone market is mainly out-of-pocket with not many companies involved, therefore this 'not fully satisfied, not fully competitive' market certainly needs more diverse and higher quality products."
China has indeed become the largest growth hormone market in the Global landscape. According to Weisheng Pharmaceutical's prospectus, in 2023, China occupies the largest share of the Global growth hormone market (34%), surpassing the USA; according to Frost & Sullivan, the size of China's growth hormone market in 2023 is estimated to be 11.6 billion RMB, and it is expected to grow to 28.6 billion RMB by 2030, with a compound annual growth rate of 13.7% during this period.
In addition to the vast market, another decisive factor is that Weigu Capital found and facilitated the incubation of better or even unique technologies and products that can meet the demand, namely Ascendis Pharma's TransCon technology and the three endocrine disorder drugs developed based on this technology.
The TransCon technology platform temporarily links inert carrier molecules with biologically active prototype drugs through a unique connection structure to form a prodrug. After entering the human body, the prodrug can slow release the unmodified prototype drug at a predictable rate, thereby exerting its physiological effects to achieve specific therapeutic goals.
Fushan pointed out that the greatest advantage of this technology is to extend the half-life of the drug and achieve long-acting effects while maintaining the natural action of the prototype drug, potentially optimizing the efficacy and safety of long-acting medications. The long-acting growth hormone developed based on this technology can address the most critical compliance issues in the current evolution of growth hormone drugs while maintaining the same safety as daily preparations of growth hormone, providing broad commercial prospects.
"Short-acting growth hormones are prone to needle leakage, which affects treatment effectiveness, while previous long-acting technologies used large molecules that caused significant pain during injections, leading to a poor experience for children. Additionally, the long-acting chemical changes to the growth hormone's molecular structure may also pose potential safety issues," explained Fu Shan. "The TransCon platform has driven a revolutionary breakthrough in long-acting technology, allowing for weekly dosing while optimizing children's injection experiences and improving compliance. On the other hand, this technology can maintain the 'natural effect' of the prototype drug, ensuring treatment effectiveness and enhanced safety."
In fact, based on the long-acting advantages of this technology, all three products from Ascendis Pharma have become Best-in-Class or even First-in-Class in their respective disease areas, and their competitive advantage in the China market is even more pronounced:
Lonapegsomatropin, which was approved by the FDA in 2021 for the treatment of pediatric growth hormone deficiency, is the world's first and currently the only long-acting growth hormone that has been clinically proven to be more effective than daily formulations of growth hormone. This was once again validated in the phase 3 trials conducted by Wuxi Biologics in China, and there have been no innovative long-acting products launched domestically for nearly a decade, which means Lonapegsomatropin is likely to become the first-line treatment of choice.
Naveleloretide, used for treating achondroplasia in children aged 2-10, has received orphan drug designation from the EC and FDA, and is poised to become the world's first long-acting (once weekly) C-type natriuretic peptide (CNP) drug for this disease. After being introduced by Wuxi Biologics, Naveleloretide is currently the first chondroplasia treatment in clinical development in China.
Paritaprevir can extend the half-life of parathyroid hormone to 60 hours, having received EC and FDA approval for launch in November 2023 and August 2024, respectively, as the world's first hormone replacement therapy for adults with chronic hypoparathyroidism. It is also the only parathyroid hormone replacement therapy that has commenced clinical development in China.
Both Lonapegsomatropin and Paritaprevir have been approved overseas, which significantly increases the likelihood that Wuxi Biologics will gain domestic approval for these products. Following risk release during the R&D phase, Wuxi Biologics, supported by a unique ecological strategy, also safeguards Wuxi Biologics during the commercialization and localized production phases after product launch.
Good products, good team, good network.
For the development path of Wuxi Biologics bringing in clinical late-stage products and rapidly entering the commercialization phase, Fu Shan had already thought of the best candidate for CEO before the establishment of Wuxi Biologics—Lu Anbang, who was then the President of Takeda Pharmaceutical in Greater China.
At that time, Lu Anbang had over 20 years of experience in the Global Biomedical Industry, especially rich experience as the person in charge of multinational MNC in the China region. During his time at Takeda Pharmaceutical, he led Takeda's key growth phase in China, achieving a sales revenue increase of over ten times. From this perspective, for a company like Weisheng Pharmaceuticals, which hopes to transplant international cutting-edge technology and products into the domestic market in China, Lu Anbang is indeed the best guide.
"Different industries can seem like mountains apart, but they share the same principles. Especially for biomedical companies in the late clinical stage, close to commercialization, there is a commonality in management," Fu Shan said. "What we need is a very good management team, with the key being international vision and expertise in business operation management."
Now, with the core product of Weisheng Pharmaceuticals starting its commercialization process, in 2023 and 2024, Weisheng Pharmaceuticals has reached collaborations with WUXI BIO and United Family Healthcare, both representative companies invested by We Wu Capital in China.
Specifically, WUXI BIO will serve as the local CDMO for technology transfer, conducting process development and validation to localize production technology and drug manufacturing, which will help ensure supply chain stability and may further achieve effects of lowering product prices and increasing accessibility; the collaboration with United Family Healthcare will focus on jointly developing diagnostic and service capabilities for children with medical needs for growth and development, helping Weisheng Pharmaceuticals tap into the high-end market for Longpei growth hormone.
"Weisheng Pharmaceuticals started discussing how to promote products on this platform with United Family Healthcare three years ago. We plan to target high-end populations, which fits United Family Healthcare's positioning and helps promote its transition from obstetrics to pediatrics and other major disciplines," Fu Shan said. "We have always emphasized an ecological strategy, hoping that our invested enterprises form collaborations across the industry's upstream and downstream and various market dimensions."
The recovery of the Chinese market is foreseeable.
The listing of Weisheng Pharmaceuticals coincided with the recovery of the Hong Kong stock market. Fu Shan candidly stated: "We started preparing for the listing four years ago, during which we encountered market changes, including the relatively sluggish early stage of the Hong Kong market. However, we predicted last year that the Hong Kong market would improve in the first half of this year and accelerated the listing pace starting from the second half of last year."
Fu Shan's determination that "the recovery of the Chinese market is predictable" is based on three points, the most important of which is "the current position of China's Biomedical innovation": "Everyone must realize that after a decade of development, China's Biomedical innovation is now at the forefront of the world. When it comes to global Biomedical innovation, besides the USA, it is definitely China. Therefore, whether it is the Star Market or Hong Kong's 18A, there is a solid foundation for industrial development, which is the main reason we believe it can recover."
At the same time, the Chinese market, including the Hong Kong market, remains one of the most stable and safest markets globally. Coupled with the continuous downturn of Hong Kong's 18A over the past few years, the time has come for quality assets to realize their value return. "With an industrial foundation, a clear business logic, and the cyclical nature of how Capital Markets operate, a recovery is a tangible and predictable change," said Fu Shan.
In this listing, Wisen Pharmaceutical ultimately raised a net amount of 0.672 billion Hong Kong dollars, of which over 0.5 billion Hong Kong dollars, 84% will be used for the commercialization of the core product Longpei Growth Factor, technology transfer, and local production. Fu Shan expects that it can quickly bring positive Cash flow to Wisen Pharmaceutical, driving profitability.
"We have always said that the Hong Kong 18A market is very much to be appreciated. It was precisely because of this pioneering move that Chinese Biomedical companies found a channel for going public aside from the USA, as well as raising a huge amount of funding to support these companies and the overall industry development," Fu Shan said. "Wisen Pharmaceutical's choice to list in Hong Kong is also our way of giving back to and expressing confidence in the Hong Kong market. We believe that stories like this will become increasingly common."
Editor/Jeffy
