New Stock Preview | With 12 Pipeline Drugs in Hand, Innovent Biologics Accelerates Overseas Expansion of ADC and Prepares for IPO.

On February 27, Ying En Biotech once again submitted an application to the Hong Kong Stock Exchange, with Morgan Stanley, Jefferies, and CITIC Securities as its joint sponsors. Previously, Ying En Biotech had submitted an application to the Hong Kong Stock Exchange on August 26, 2024, which expired on February 26. It is worth noting that at the beginning of this year, Ying En Biotech received good news and once again achieved internationalization of ADC. On January 8, Ying En Biotech licensed the EGFR/HER3 bispecific ADC DB-1418 to Avenzo Therapeutics for $50 million upfront payment and milestone payments of up to $1.15 billion. Can Ying En Biotech add another happy event this time and obtain a "pass" for listing on the Hong Kong stock market? Holding 12 ADC drugs ADC internationalization accelerates The prospectus shows that Ying En Biotech was established in 2019 and is a global leader in the field of antibody-drug conjugates (ADC). The company is dedicated to developing new generation ADC innovative drugs for patients with cancer and autoimmune diseases. Using its own ADC technology platform, the company has established various differentiated pipelines that aim to revolutionize cancer treatment and provide therapies that significantly improve the treatment outcomes of patients worldwide. Currently, the company has two core proprietary products, namely DB-1303/BNT323 (a HER2 ADC candidate drug targeting HER2 cancers including endometrial and breast cancer) and DB-1311/BNT324 (a B7-H3 ADC candidate drug targeting B7-H3 cancers including small cell lung cancer, castration-resistant prostate cancer, and esophageal squamous cell carcinoma). In addition to the core products, the company has also developed five other clinical-stage ADC drugs with potential in various indications, each of which is at the forefront of global clinical development according to Frost & Sullivan. Two new dual-specific ADCs are expected to enter clinical stage between 2025 and 2026. The company has attracted leading biopharmaceutical companies worldwide with its innovative ADC assets, and has established several global partnerships, including collaborations with BioNTech SE, BEIGENE Limited, Adcendo ApS, GSK plc, and Avenzo Therapeutics, Inc., with a total transaction value of over $6 billion (of which approximately $400 million has been received by the final feasible date). Despite holding 12 ADC drugs, Ying En Biotech does not have any commercialized products on the market and relies mainly on external licensing for revenue. The company disclosed that the total value of milestone payments for its ADC-related assets established through collaborations has exceeded $4 billion, but the company is still struggling with losses. For the nine months ending on September 30, 2022 to 2024, Ying En Biotech's income was approximately 1.6 million yuan, 1.787 billion yuan, and 1.462 billion yuan respectively, while the losses for the same periods were approximately 387 million yuan, 358 million yuan, and 566 million yuan respectively, with a cumulative loss of 1.311 billion yuan. In short, like most biotechs, Ying En Biotech also faces financial difficulties. Even in 2023, when it achieved a large licensing deal, Ying En Biotech still suffered a loss of 358 million yuan. As of February 19, the company's total assets were 1.805 billion yuan, while total liabilities were as high as 3.303 billion yuan. In terms of commercialization, as of February 19, the company has not received any marketing approval for any candidate drugs, nor has it generated any revenue from product sales. It is expected that ADC will achieve commercialization in the coming years, and the company plans to maximize the commercial value of candidate drugs through the selection of the best commercial models (including establishing internal commercialization capabilities) and/or collaborations with third parties (such as distributors, contract sales organizations, and licensing partners). The continuous losses of Ying En Biotech are due to the significant investment required for research and development, as well as the impact of previous rounds of financing. The large investors in the pre-IPO rounds mostly purchased preferred shares, and with the increase in valuation, Ying En Biotech recorded a significant loss of 1.018 billion yuan in value changes of preferred shares in 2023. Despite not having commercialized products, the internationalization of ADC is actively providing "blood transfusion" for Ying En Biotech. Just at the beginning of this year, Ying En Biotech completed two ADC drug transactions in a row. One was to license the HER2 ADC drug DB-1303 for multiple indications in mainland China, Hong Kong, and Macau to Shenyang Sansheng; the other transaction was to license a preclinical pipeline DB-1418/AVZO-1418 globally (excluding Greater China) for development, manufacturing, and commercialization to Avenzo Therapeutics, Inc. In these two transactions, Ying En Biotech will receive $75 million upfront payment, with additional milestone payments for development, registration, and commercialization in the future. The trend of biotech authorization for internationalization is sweeping through, but the progress of commercialization still needs to be monitored. The overseas trade of ADC drugs is becoming increasingly active. According to incomplete statistics, at least 14 ADC drugs reached overseas transactions in 2024, with nearly half of the drugs having total transaction amounts exceeding $1 billion. And amid the wave of biotech authorization for internationalization, there are also outstanding performers. For example, at the end of 2023, BeiLi Tianheng reached a potential blockbuster deal of $8.4 billion with BMS for BL-B01D1, breaking the record for domestic innovative biopharmaceutical companies. Record of new drug going overseas for authorization.It is worth mentioning that Bailitianheng's BL-B01D1 is also a dual-target ADC drug that can target EGFR and HER3. Compared with YingEn Biotech's DB-1418, its research and development progress is faster. It is currently undergoing over 20 clinical trials for various types of tumors in China and the United States, with 5 indications included in the breakthrough therapy list. In this case, YingEn Biotech is clearly facing significant competitive pressure. Furthermore, looking at YingEn Biotech's pipeline layout, it has both validated mature targets such as HER2 and TROP2, as well as emerging targets like B7-H3 and HER3, and has also laid out dual-target ADCs (such as DB-1419) and ADCs targeting autoimmune diseases (such as DB-2304). In terms of progress and differentiated development strategy, taking the example of DB-1303 targeting HER2, its first indication is for HER2-expressing EC, avoiding competition with approved drugs. It is currently in a global single-arm Phase 2 registration study and is expected to apply for accelerated approval from the FDA in 2025. In terms of the global market capacity for HER2 ADCs, it is expected to grow at an annual compound 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 competition, as of the final feasible date, two HER2 ADCs (Enhertu and Kadcyla) have been approved in the United States, while another HER2 ADC (Zercepac) has been approved in China. As of the same date, three HER2 ADCs (including Enhertu) are in global multi-regional clinical trials (MRCT) or later-stage III clinical development. With many competitors, it is evident that YingEn Biotech's commercialization process is not early. In conclusion, as YingEn Biotech's products have not yet been commercialized, research and development expenditure coupled with changes in the value of preferred shares from previous financing have resulted in the company's losses. However, the expansion of ADCs overseas has brought in revenue for the company, to some extent alleviating its liquidity pressures. From the prospectus, most of the company's pipeline products are in the early stages of clinical development, so whether they can stand out in the competitive ADC technology platform will depend on their subsequent research and development capabilities and market performance.