New Stock Preview | Maiwei Biotech: the commercialization of three products can't hide the pain of high debt. Can going public in Hong Kong help solve the problem?

On January 6th, MaWei (Shanghai) Biotechnology Co., Ltd. (referred to as MaWei Biotech) submitted an application for listing on the Hong Kong Stock Exchange, with CITIC SEC and HAITONG INT'L as joint sponsors. According to information, MaWei Biotech was listed on the Science and Technology Innovation Board in January 2022. Once listed on the Hong Kong Stock Exchange, it will form an "A+H" share structure. Public information shows that the company has raised a total of RMB 3.477 billion, with a net fundraising amount of RMB 3.303 billion after deducting expenses. According to the Special Report on the Deposit and Actual Use of Funds Raised in 2023 by MaWei Biotech, the cumulative amount of funds raised is RMB 1.483 billion, with an additional RMB 0.824 billion in temporary supplementary working capital; as of the end of December 2023, the actual remaining balance of funds raised was RMB 1.062 billion. Taking into account MaWei Biotech's financial situation, the plan to list on the Hong Kong Stock Exchange actually signals that after three years of being listed on the Science and Technology Innovation Board, this company seems to be running out of money. The "A+H" layout may become an important way for MaWei Biotech to "blood transfusions." 10-month loss of RMB 0.864 billion Asset-liability ratio as high as 150% According to the prospectus, MaWei Biotech is a pharmaceutical company mainly focused on the independent development of drugs for cancer and age-related diseases and is in the commercialization stage. Over the years, the company has built a competitive and multi-layered pipeline product portfolio, including more than 10 drug assets covering different varieties, focusing on areas such as oncology, age-related diseases, immunology, ophthalmology, orthopedics, etc. MaWei Biotech's core product 9MW2821 (an antibody-drug conjugate (ADC) targeting Nectin-4) reflects the company's strength in ADC technology and wide professional knowledge in the field. According to Frost & Sullivan data, as of the last feasible date (December 30, 2024), in terms of clinical development stage, 9MW2821 is the fastest progressing among all ADCs targeting Nectin-4 used for treating urothelial cancer in China, second only to Padcev (the only Nectin-4 ADC approved by the FDA globally), and it is the first and only Nectin-4 ADC to enter a pivotal Phase III trial for cervical cancer. The company is conducting multiple clinical trials for 9MW2821, including Phase III trials for 9MW2821 as monotherapy and in combination with trastuzumab for the treatment of urothelial cancer, Phase III trials for 9MW2821 as monotherapy for the treatment of cervical cancer, and Phase II trials for 9MW2821 as monotherapy or in combination with trastuzumab for the treatment of triple-negative breast cancer. As of the last feasible date, MaWei Biotech has obtained 124 patents globally and submitted 239 patent applications, including 22 patents and 20 patent applications related to core products. MaWei Biotech's pipeline focuses on innovative drugs while maintaining a balance with established mechanisms. Regarding innovative drugs: the company implements a strategy of creating differentiated drugs using new pathways and first-mover advantages. ADCs are a key component of the company's pipeline. In addition to the core product 9MW2821, the company is also advancing other ADC candidate drugs targeting other targets with competitive advantages, including 7MW3711 (an ADC targeting B7-H3) and 7MW4911 (an ADC targeting CDH17). In addition to ADCs, the company has established a rich and competitive product pipeline, including monoclonal antibodies, fusion proteins, small molecule drugs, etc., including 9MW1911 (China's first clinically developed self-developed candidate drug targeting ST2) and recombinant humanized anti-TMPRSS6 monoclonal antibody 9MW3011 (a globally leading targeted TMPRSS6 therapeutic drug). It is worth noting that MaWei Biotech's three products Junmaikang, MaiweijianR (oncology), and Mailishu (orthopedics) were approved for marketing in March 2022, March 2023, and March 2024 respectively, gradually entering the stage of volume production. Although the commercialized products have gradually contributed to revenue, the company's loss situation has not shown a clear improvement. During the ten months ending on October 31, 2023 to 2024 (referred to as the reporting period), MaWei Biotech achieved revenues of approximately RMB 128 million and RMB 160 million respectively, with corresponding net losses of RMB 1.059 billion and RMB 0.864 billion. In other words, in less than two years, MaWei Biotech has a total loss of RMB 1.923 billion. The high losses are mainly due to high research and development investment, with corresponding research and development expenses of RMB 0.836 billion and RMB 0.606 billion during the period. In a situation where expenses exceed income, profitability is always a sword hanging over the head of MaWei Biotech, making timely replenishment of the company's financial firepower crucial. As of October 31, 2024, MaWei Biotech had approximately RMB 1.415 billion in cash and cash equivalents (current assets of approximately RMB 1.821 billion); in terms of liabilities, the company had approximately RMB 1.48 billion in current liabilities, of which approximately RMB 1.053 billion were short-term loans, and approximately RMB 1.149 billion in non-current liabilities, of which approximately RMB 0.986 billion were long-term loans. From the latest financial data, MaWei Biotech is not actually "well-off", with total short-term and long-term loans approaching RMB 1.9 billion, and a considerable portion of past investments have been allocated to fixed assets and project research and development (total research and development expenses from 2023 to October 31, 2024 amount to approximately RMB 1.442 billion). With research and development investment increasing, MaWei Biotech's liquidity is becoming increasingly tight. As of the end of October 2024, MaWei Biotech's asset-liability ratio had reached 150%. Since 2024, the company has been continuously taking financing actions. MaWei Biotech has twice increased the credit and financing quotas applied to financial institutions this year, from an initial total of no more than RMB 2.3 billion to no more than RMB 6.2 billion. Despite holding three commercialized products, MaWei Biotech, which continues to incur losses, can only rely on financing to maintain operations.Introducing investors, right hand going to Hong Kong for financing.The layout of bone health innovative drugs had early signs In addition to the high R&D investment, Mayward Biology's sales costs cannot be ignored. In 2023, the company's sales expenses were 143 million yuan, an increase of 81.99% year-on-year. The company's operating income for the year was only 128 million yuan. At the same time, in the past year and a half, Mayward Biology has added 350 employees, an increase of about 33%. Considering the reduction of the research and development team, it can be speculated that the company has added a significant number of sales positions. Doing business in the domestic biosimilar drug market is not easy, choosing this path means struggling to survive in low prices. From the current financial reports, the company's commercial output is limited. In the tight cash flow situation, Mayward Biology faces a difficult choice between prioritizing R&D investment in innovative pipelines or marketing investment in biosimilar drugs. However, according to reports, based on the recent "Bone Health Innovative Drug Project" reached between Mayward Biology and Chongqing local authorities, the company's choice may be "both". Public information shows that the company signed a contract for the "Mayward Biology Bone Health Innovative Drug Project" with the Chongqing New High-tech Industrial Development Zone Management Committee and the Chongqing Zhongxin Pharmaceutical Healthcare Private Equity Fund Partnership Enterprise (Limited Partnership) (referred to as "Health Fund"), with the company's second-tier wholly-owned subsidiary Mayward (Chongqing) Biopharmaceutical Co., Ltd. as the project operating entity, jointly investing in the construction of the "Mayward Biology Bone Health Innovative Drug Project". The total planned investment for the project is 2 billion yuan, with Mayward Biology's total investment not less than 1.6 billion yuan (this round of investment is 1.008 billion yuan), contributed in the form of intangible assets, i.e., "drugs"; the Health Fund plans to invest a total of 400 million yuan (this round of investment is 200 million yuan) in monetary form. The 2 billion project of Mayward Biology will naturally be a base integrating research and development, production, and commercial sales. In fact, from the cooperation reached in August this year between Mayward Biology and Runjia Medicine to introduce the bone and joint arthritis drug RP901 in Greater China region, it can be seen that the company is increasing its presence in the bone health drug field. In addition to RP901, the drugs related to bone health in Mayward Biology include Denosumab (treatment of postmenopausal osteoporosis and giant cell tumor in women) and Adalimumab (treatment of rheumatoid arthritis, ankylosing spondylitis, etc.). Among these pipelines, the core revenue contribution in the medium to short term is still Denosumab. According to IQVIA data, the sales of Denosumab in China and globally in 2022 were approximately 477 million yuan and 6.22 billion US dollars respectively. In China, the original research drug Denosumab's patent expired in June 2022, the competitive landscape is not good, and as of May 2024, there are 3 biosimilar drugs expected to be launched in the next two years. However, multiple data sources are optimistic about the domestic market space for Denosumab, given the large population of osteoporosis patients in China and the large market size of several commonly used osteoporosis drugs in the past (such as bisphosphonates). According to Mayward Biology's prospectus, by 2030, the market size of Denosumab and its biosimilar drugs in the domestic market is expected to exceed 10 billion yuan. Although the cooperation with Chongqing locally can temporarily relieve Mayward from the struggling sales work, expanding into the market of just one city obviously cannot solve the company's profitability problem. Compared to A-shares, the capital sources in the Hong Kong market are more diversified, attracting many international capital and investment institutions. For A-share listed companies to go public in Hong Kong, they can enhance their visibility in the international market and use the funds raised to better carry out overseas business. For Mayward Biology, successfully listing in Hong Kong can also access more funds for daily operations and R&D. Finding a turning point in profitability in the midst of losses, and standing out in competition, will be key issues that Mayward Biology needs to address.