New stock research report | Nine Sources Genetics (02566) starts IPO today. Introducing 7 cornerstone investors to subscribe for about HKD 350 million shares in total.

Jiuyuan Gene (02566) was founded in 1993 and is a SINO BIOPHARM company headquartered in Zhejiang Province, with over 30 years of experience in the research and development, production, and commercialization of biopharmaceuticals and medical devices. Offering date: November 20th to 25th Listing date: November 28th Sole sponsor: Huatai International Receiving bank: CITIC BANK (INTERNATIONAL) 4,539.88 million H shares will be offered, with approximately 90% reserved and approximately 10% offered to the public, with an additional approximately 15% of over-allotment option. If the public offering is oversubscribed by at least 15 times up to 50 times, the public offering percentage will increase from 10% to 30%. If oversubscribed by at least 50 times up to 100 times, the percentage will increase to 40%, and if oversubscribed by 100 times or more, it will be increased to 50%. If the reserved shares are undersubscribed while the public offering is fully subscribed, or if both are fully subscribed but the public offering subscription is less than 15 times, the public offering percentage can be increased to a maximum of 20%, subject to a minimum price. The offer price per share is HK$11.48 to HK$12.56, raising a maximum of approximately HK$570 million, accounting for approximately 18% of the total market value, with listing expenses of approximately RMB 71.8 million. Based on 200 shares per board lot, the subscription fee is HK$2,537.33. Based on the upper limit price of HK$12.56, the market value is approximately HK$3.082 billion (calculated based on adjusted net profit of approximately RMB 141 million in 23 years, with a P/E ratio of approximately 20.2 times). As of the end of June 24, the average net asset value is approximately RMB 1 billion. The public offering is divided into Group A (up to 5 million applicants) and Group B (applicants above 5 million). Business: Revenue for the years 2021 to 2023 was RMB 1.3 billion, RMB 1.12 billion, and RMB 1.28 billion, and revenue in the first half of 2024 was RMB 702 million. Gross profit for the years 2021 to 2023 was RMB 950 million, RMB 854 million, and RMB 990 million, and gross profit in the first half of 2024 was RMB 540 million. Net profit for the years 2021 to 2023 was RMB 119 million, RMB 59.86 million, and RMB 119 million, and net profit in the first half of 2024 was RMB 105 million. Adjusted net profit for the years 2021 to 2023 was RMB 119 million, RMB 60.04 million, and RMB 141 million, and adjusted net profit in the first half of 2024 was RMB 114 million (excluding one-time factors such as share-based payment expenses and listing expenses). The company focuses on four rapidly growing therapeutic areas: orthopedics, metabolic diseases, oncology, and hematology. These four therapeutic areas accounted for 51.5% of total pharmaceutical sales in China from 2018 to 2023 and outperformed the overall industry performance of China Meheco Group during that period. It is expected that this trend will continue in the near future. The company has built a diversified product portfolio around these therapeutic areas, including eight marketed products (including China's first recombinant human bone morphogenetic protein-2 "rhBMP-2" bone repair material BoneOptima), and over 10 investigational products (including China's first IND-approved and NDA-submitted somatostatin biosimilar JY29-2). The first step of the company's strategy is to identify therapeutic targets with market potential in the focused areas. After identifying the targets, the company will use its mature research and development platform, production capabilities, and sales and distribution networks to develop innovative and first-to-market generic products in China. The company's marketed product portfolio includes a medical device combination in orthopedics, oncology, and hematology areas, two biologics, and five chemical drugs. Based on revenue share in 2023, the company has several products that are the first domestically produced products to be approved for commercialization in their respective categories and maintain a competitive position. The most notable product is BoneOptima, a medical device combination product that is China's first approved rhBMP-2 bone repair material, which ranked first in the Chinese bone repair material market by sales revenue in 2023. The company recognizes the significant growth potential of BoneOptima and therefore acquired the product from Hangzhou Huadong Medicine Group Co., Ltd. in 2010, with most of the revenue in the historical period coming from this product. The company has stated that it does not engage in genetic engineering business and is in the process of changing its name to "Hangzhou Jiuyuan Gene Biopharmaceutical Co., Ltd." within 12 months after listing. Approximately 40% of the funds raised will be allocated to the continued research and development of selected investigational products in strategic key therapeutic areas, approximately 30% will be used for marketing and commercialization of existing and near-commercialization products, approximately 10% will be used for seeking strategic collaborations, approximately 10% will be used for manufacturing systems, and approximately 10% will be used for working capital and general corporate purposes. Pre-listing financing: Between February 1997 and August 2023, multiple rounds of financing were conducted, with the offering price discounted by approximately 97.77% to 62.7% from the middle price, and a 12-month lock-up period was set. Early investors include Hangzhou Huasheng, Insigma Technology (600797.SH), CQFE, Highland Pharma, Hangjin Investment, Zhejiang Wanliyang, and others. Cornerstone investors: Introduction of 7 cornerstone investors subscribing to approximately HK$350 million in shares, including Hangzhou Huada subscribing to approximately HK$194 million, Shanghai Fosun Pharmaceutical subscribing to approximately HK$38.89 million, Nanjing Jianyou subscribing to approximately HK$38.89 million, ALI HEALTH subscribing to approximately HK$23.34 million, Jointown Pharmaceutical Group subscribing to approximately HK$23.34 million, Mr. Wu Qi-yuan subscribing to approximately HK$21.47 million, and Delta Capital subscribing to approximately HK$12 million. Based on the mid-price calculation, this accounts for approximately 64.14% of the shares offered, with a 6-month lock-up period. Major shareholder structure after listing: Huadong Medicine (000963.SZ) holds 17.16% Mr. Li Bangliang holds 14.19%.The sentence translates to "I am going to the store on Monday."Early investors hold 50.87% of the shares. Other investors participating in the global offering hold 17.78% of the shares. Commentary: Jiuyuan Genetics (02566) was founded in 1993 and is a SINO BIOPHARM company headquartered in Zhejiang Province with over 30 years of experience in the research, development, production, and commercialization of biopharmaceuticals and medical devices. Based on a maximum price of HK$12.56, the market value is approximately HK$3.082 billion, with a price-earnings ratio of approximately 20.2 times calculated based on a net profit adjusted for 23 years of approximately RMB 141 million. Seven cornerstone investors were introduced, subscribing to approximately HK$350 million worth of shares, representing approximately 64.14% of the shares offered, with a lock-up period of 6 months. This article was contributed by "Guosen Securities" and written by Guosen Securities analyst Chen Bohao; GMTEight editor: Chen Xiaoyi.