New stock preview | YingEn Biotech: Revenue of nearly 1.8 billion yuan still in losses, Zhu Zhongyuan's "Capital Bureau" AB side

In the 2023 ADC against BD transaction, Imeon Biotech emerged in the capital market as a strong "dark horse". At that time, Imeon Biotech's ADC assets in the research and development pipeline were almost completely swept away. Following BioNTech's introduction of two ADCs for 1.67 billion USD in April 2023, in August they once again jointly pushed forward the development of a third ADC candidate drug, DB-1305. BEIGENE gave a total transaction contract of 1.3 billion USD for only one preclinical ADC drug, demonstrating its strong capabilities. In the secondary market in 2024, Imeon Biotech's ambitions are revealed. Recently, the company applied for an IPO in Hong Kong, which was accepted by the China Securities Regulatory Commission. On August 26th, it submitted an application for listing on the Main Board of the Hong Kong Stock Exchange, with Morgan Stanley, Credit Suisse, and CITIC SEC as joint sponsors. Imeon Biotech was founded in 2019, and this innovative drug company, established only 5 years ago, has quickly risen and made an impact on the capital market, thanks to its founder, Zhu Zhongyuan. Backed by Zhu Zhongyuan's powerful "circle of friends" in the pharmaceutical investment circle, Imeon Biotech completed 4 rounds of financing in a short period of time, with cumulative financing of up to 138 million USD. Investors include "Yao Ming Group", investment institutions under the Lilly Asia Fund, China New Venture Capital, Fujian Septwolves Industry's Shenglian, and Tianlishi International Capital. Imeon Biotech's post-dilution estimated valuation is 270 million USD, equivalent to 1.86 billion RMB (calculated at the exchange rate on September 1, 2022). Imeon Biotech holds 12 ADC drugs, with losses exceeding 800 million RMB over 2 years. According to the prospectus, Imeon Biotech is dedicated to developing a new generation of ADC innovative drugs for cancer and autoimmune diseases. The company has established a highly innovative and differentiated pipeline consisting of 12 independently developed ADC candidate drugs. Specifically: six clinical stage ADCs, which have the potential in unmet clinical needs in broad indications, each of them ranks among the global leaders in terms of overall or major indications development progress, according to Frost & Sullivan; two new generation bispecific ADCs ("BsADC") and one ADC for the treatment of autoimmune diseases ("Autoimmune-ADC") are expected to enter the clinical stage from 2024 to 2026; and multiple other preclinical ADCs. Imeon Biotech's three clinical stage assets (including its core products DB-1303/BNT323 and DB-1311/BNT324, as well as the key product DB-1305/BNT325) have been granted fast-track designation by the FDA. DB-1303 has been granted breakthrough therapy designation by the FDA and the Chinese National Medical Products Administration for specific indications. Imeon Biotech has also developed four leading ADC technology platforms: the Imeon Immunotoxin Antibody Conjugate Platform (DITAC), the Imeon Innovative Bispecific Antibody Conjugate Platform (DIBAC), the Imeon Immunomodulatory Antibody Conjugate Platform (DIMAC), and the Imeon Unique Payload Antibody Conjugate Platform (DUPAC) to push the boundaries of ADC therapies. Despite holding 12 ADC drugs, Imeon Biotech has no commercial products on the market, and its income mainly relies on external licensing. Imeon Biotech disclosed that the total value of milestones established for its ADC-related assets has exceeded 4 billion USD, but the company has still not emerged from the loss morass. For the three months ending on March 31, 2022, 2023, and 2024 (hereinafter referred to as the reporting period, the same below), Imeon Biotech's revenue was approximately 1.6 million RMB, 1.787 billion RMB, and 641 million RMB respectively; the total loss during the period was approximately 387 million RMB, 358 million RMB, and 65.942 million RMB, totaling a loss of approximately 811 million RMB. The loss is mainly due to expenses related to research and development activities and the fair value changes of financial liabilities related to preferred shares; research and development expenses were 340 million RMB, 559 million RMB, and 311 million RMB respectively. In summary, like most biotechs, Imeon Biotech is also facing a financial squeeze. Even in 2023 when it achieved a large licensing deal, Imeon Biotech still suffered a loss of 358 million RMB. Currently, Imeon Biotech's total assets are 1.7 billion RMB, while total liabilities amount to 2.8 billion RMB, a serious imbalance. Observing further, the continuous losses of Imeon Biotech are due to the need for large-scale research and development, as well as the effects of previous financing. The large investors in the various rounds of financing before the IPO mostly acquired preferred shares, and with the increase in valuation, Imeon Biotech recorded a large loss of 1.018 billion RMB in the fair value change of preferred shares in 2023. Imeon Biotech also explicitly stated in the prospectus a shareholder agreement for the redemption of preferred shares. As of March 31, Imeon Biotech had cash reserves of 1.33 billion RMB, which the company stated is enough to cover until next March. Imeon Biotech can no longer afford any redemption requests for shares. Therefore, Imeon Biotech stated that in August, a supplemental agreement was reached with shareholders to suspend the redemption function, provided that the IPO is withdrawn or rejected, or until 18 months after the initial submission date. Imeon Biotech's only way forward now is to strive for a listing on the Hong Kong Stock Exchange. Most of its pipeline is in the early clinical stages, with commercialization still in the early stages. In fact, not building its own facilities but using CXO (pharmaceutical contract outsourcing), and financing through BD, can be considered as a lesson and survival strategy that domestic biotechs have learned in the post-wave years of the innovative drug industry. This also aligns more with the biotech's inherent strengths and division of labor in the industry, where its competitive advantage lies in innovative technology research and development, while late-stage development and commercialization are the strengths of large pharmaceutical companies. However, it is important to note that despite the broader exploration space for ADC as a drug type compared to the previous PD-1 target, competition in this field globally is equally fierce. From the perspective of Imeon Biotech's pipeline layout, most of its pipeline is in early clinical stages, and commercialization is still in the early stages.There are mature validated targets HER2 and TROP2, as well as emerging targets B7-H3, HER3, etc. Subsequently, dual targeting ADCs such as DB-1419 and ADCs targeting self-immune diseases such as DB-2304 have also been developed.In terms of progress and differentiation development strategy, taking the example of DB-1303 targeting HER2, its first indication is HER2-positive EC, avoiding collision with already marketed drugs. It is currently in the global single-arm phase 2 registration study stage and is expected to apply for accelerated approval from the FDA (Food and Drug Administration) in 2025. In terms of the global market capacity for HER2 ADC, it is estimated that the market will grow at a compound annual growth rate of 30.8% from 2023 to 2028 and 16.8% from 2028 to 2032, reaching $34.5 billion in 2032. In terms of competitive landscape, as of the last feasible date, there are two HER2 ADCs approved in the United States (Enhertu and Kadcyla), while there is another HER2 ADC approved in China (. As of the same date, three HER2 ADCs, including Enhertu were in the global multi-regional clinical trial (MRCT) phase III clinical development or later stage. With many competitors, it can be seen that Anning Bio's commercialization process is not early. In conclusion, although BD transactions have contributed a lot of revenue to Anning Bio, the company still faces a situation of insolvency due to the fact that the drug has not yet been commercialized, and research and development investment, as well as the value change of preferred stocks brought by early financing. From the prospectus, most of the company's pipeline products are still in the early stages of clinical development, so whether they can stand out in the competitive ADC technology platform will still depend on their subsequent research and development capabilities and market performance.