Text/Rui Finance Cheng Mengyao
In the pharmaceutical industry, there has been a "double ten law" that has been circulating, that is, it takes 10 years and a cost of 1 billion US dollars to commercialize a drug from research and development. Therefore, in addition to focusing on research and development, finding money is also the daily work of biomedical companies to survive.
just received 300 million yuan in financing from Qingdao Hi-Tech a year ago, but Huayuan Biotechnology (Qingdao) Co., Ltd. (abbreviation: Huayong Biotech) has already begun to prepare for the next round of financing. The pace of
A-share IPOs has been tightened in stages. Cro company Noconda has been denied access to the GEM. Many unprofitable pharmaceutical companies such as Paipide Biotech, Huahao Zhongtian, and Huamai Tyco voluntarily withdrew their IPO applications. Huayong Biotech directly Eyes on the Hong Kong Stock Exchange.
However, in the 12 years since the company was founded, no product has yet been commercialized, which is a pain point that Huashui Biotech’s IPO cannot cover up. Moreover, of its two core products, the one with the fastest progress has only reached Phase II clinical trials. If all goes well, it will not be launched on the market until 2027. This also means that in the next three years, there will be no commercial products that will bring operating cash inflows to Huayuan Biotech. Faced with continued investment, there is still pressure to find money.
It is worth mentioning that just before Huayuan Biotech submitted its report to the Hong Kong Stock Exchange, the China Securities Regulatory Commission publicly solicited opinions on the "Decision on Amending the "Guidelines for the Evaluation of Science and Technology Innovation Attributes (Trial)", in which Article 1. The item "amount of R&D investment in the last three years" was increased from "a total of more than 60 million yuan" to "a total of more than 80 million yuan"; the third item "invention patents applied to the company's main business" was increased from "more than 5 " was raised to "more than 7 items"; it was interpreted by many people in the biopharmaceutical industry as another signal of tightening of listing review.
Since Huayuan Biotech only disclosed its research and development expenses in 2022 and 2023, which were 34.818 million yuan and 39.915 million yuan respectively, compared with the "new standard", it is still a little short of the threshold of "80 million yuan in total in the last three years".
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Jia Lijia’s mother and son hold 37.5% of the shares
The “post-90s” son serves as the president
Huayuan Biotechnology was founded in April 2012. It was formerly known as Beijing Zhonghong Seth Biotechnology Co., Ltd. (abbreviation: Seth Biotechnology), led by Jia Li Jia, Li Desheng, Guo Jing, and Li Gewei invested a total of 10 million yuan to establish and jointly lead the establishment.
was renamed for the third time to the current Huayuan Biotechnology on April 1, 2024. Along with the name change, the composition of Huayuan Biotech's shareholders has changed significantly. Among the founding shareholders, Li Desheng and Guo Jing cashed out 10.5 million yuan and 1 million yuan respectively in 2018 and 2013. External capital entered, and CDH Investment invested 1 300 million, Qingdao Hi-Tech invested 300 million in one go; Jia Lijia’s son Wang Kelong became the second largest shareholder through equity transfer and capital increase, and became president. When
submitted the form, Huayuan Biotech had 10 shareholders, among which Jia Lijia held 19.54%, Wang Kelong held 17.98%, and mother and son held a total of 37.52%; Zhang Hongbo held 17.47%, and Li Gewei held 12%; external Shareholders Qingdao Hi-Tech holds 9.09% of the shares, CDH Investment holds 4.83% of the shares; employee stock ownership platform Qingdao Huayuan holds 8.00% of the shares, Hainan Chinese holds 4.78% of the shares; natural persons Song Jianqing holds 5.76% of the shares, and Zhang Hong holds 0.54% of the shares.
Among them, Jia Lijia, Wang Kelong, Zhang Hongbo, and Li Gewei jointly hold 66.99% of the shares of Huashan Biotech through a concerted action agreement, and have absolute control over Huashong Biotech.
Jia Lijia also serves as executive director and chairman of the board of directors; Wang Kelong serves as president, executive director and vice chairman of the board of directors; Zhang Hongbo and Li Gewei currently have no positions. Li Gewei was previously a director and manager of Seth Biotech.
Jia Lijia has more than 27 years of experience in the pharmaceutical industry. Before establishing Huayuan Biotech, he served as the sales manager of Mudanjiang Lingtai Pharmaceutical Co., Ltd. (Beijing office) and the deputy general manager of Beijing Shenghongye Pharmaceutical Technology Development Co., Ltd., mainly responsible for sales and operation management.
Wang Kelong is a "90s" generation. He joined Huasui Biotech as a director in October 2020 and was transferred to executive director in April 2024. His personal resume is quite eye-catching. Before joining Huayong Biotech, Wang Kelong worked at Berkshire Hathaway Automotive. Subsequently, Beijing Green Auto Technology Co., Ltd. was established and served as CEO from April 2017 to September 2020, responsible for overall operations.
was selected into the 2019 Forbes China Under 30 Elite List and the 2018 Hurun 30×30 Entrepreneurial Leaders; in May 2023, he became a director member of the tnc Nature Association Greater China.
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Li Gewei has held shares for more than 12 years
The return rate has reached 32 times
Li Gewei, who has "retired behind the scenes", has a richer business resume. According to Tianyancha data, Li Gewei currently serves as a shareholder in 35 companies and 16 companies. Served as senior executives, including executive director of New World Strategic Investment Co., Ltd., chairman of Yunnan Guoyi Mining Investment Co., Ltd., chairman of Shanghai Kaishiyi Network Technology Co., Ltd., vice chairman of Beijing Zhongbei Television Art Center Co., Ltd., etc.; Li Ge Wei joined Hualin Securities (002945.sz) in November 2013 and served as a director from March 2016 to May 2022.
When Seth Biotech was established in 2012, Li Gewei invested 1 million yuan to occupy 10% of the shares and served as director and manager. As time passed, he retired from his position, but his investment in Huayuan Biotech continued to expand.
In September 2013, Li Gewei took over 1 million registered capital from Jia Lijia through equity transfer, expanding the shareholding ratio to 20%; then he increased capital to Huayuan Biotech three times, with a total of 10 million yuan. Li Gewei’s price for each increase is 1 yuan/registered capital, and his registered capital of 12 million yuan currently corresponds to 12% of the shares. Based on the valuation of 3.3 billion yuan after the B-round financing, this equity is worth 396 million yuan, with a return rate of 32 times.
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Luxurious team of directors, supervisors and senior executives endorsed
Rui Finance's "Pre-review IPO" noted that in addition to the strong background of investors, Huayuan Biotech's senior management team is very luxurious. In its latest board of directors composition, the number of financial personnel is quite prominent, and their resumes are also very Bright. Winning over a group of senior financial personnel shows Huayuan Biotech's desire for this IPO.
Its chief financial officer, vice president and secretary of the board of directors, Peter Ho, is 57 years old. He joined Huaxuan Biotech in May 2023. He was the senior deputy director of the finance department of China Resources Group and the assistant of the corporate planning and development department of China Resources Beer (0291.hk). General manager; senior investment manager of the investment department of Hang Lung Properties (0101.hk); currently also serves as an independent non-executive director and member of the audit committee of Guanghui Baoxin (1293.hk).
non-executive director Miao Tianxiang is 66 years old. He has served as a director since July 2023 and was transferred to a non-executive director in April 2024. After leaving the post of associate professor at Dongbei University of Finance and Economics, he held various positions at Huizhi Pharmaceutical Co., Ltd. (formerly known as Pfizer Upjohn Pharmaceutical Trading Co., Ltd.). His last position was chairman of the Greater China Regional Office. In December 2016, he was The China Enterprise Financial Evaluation Expert Committee named him the 2016 China International Financial Leader of the Year.
non-executive director Lin Ying is 42 years old. She has served as deputy financial director of China Resources Group, financial director of Nanjing Huaxia Health Industry Group, and executive director of Qingdao Dinghui Runzhong Investment Management Co., Ltd. Currently, he serves as the director, executive vice president and financial director of Zhongju High-tech (600872.sh). Huayuan Biotech can obtain financing from Qingdao CDH in 2021, perhaps with the help of Lin Ying.
independent director Fok Zhida is 50 years old. He has more than 20 years of experience in the fields of auditing, corporate finance and investment banking. He is the founder and managing director of Max Capital. He once served as deputy director of the investment banking department of Huatai Financial Holdings (Hong Kong) Co., Ltd. and director of Yinggao Financial Consulting Co., Ltd. He has served as an independent non-executive director of Suntian Properties Group (00760.hk) since August 2019.
Independent Director Li Jiayan is 60 years old. He was a member of the Party Committee (vice president level) of China Everbright Bank (601818.sh); he currently works at Hisense Group Holdings Co., Ltd. as Vice President and Deputy Director of the Strategy and Investment Committee of the Board of Directors.
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caught up with CDH Investment and Qingdao Hi-tech.
’s valuation quadrupled in two years. Since its establishment, Huayuan Biotech has received a total of more than 400 million yuan in financing. Investors include CDH Investment, Qingdao Hi-Tech, etc. After completing the last round of financing before the IPO in May 2023, its valuation has exceeded 3.3 billion yuan.
Rui Finance's "Pre-review IPO" noted that Huayuan Biotech's financing rhythm is almost the same as its name change rhythm. Under the "big tree" of the state-owned Qingdao Hi-Tech, its valuation has quadrupled in two years.
In October 2020, Seth Biotechnology changed its name to Beijing Huayuan Biotechnology Co., Ltd. for the first time. Then in May and October 2021, it welcomed the entry of Zhang Hong and Dinghui Investment, completing the pre-A round and A round. Financing. The valuation increased from 805 million yuan after the pre-A round to 2.021 billion yuan after the A round, an increase of 2.5 times in less than half a year.
In June 2023, Seth Biotechnology further changed its name to Huayuan Biotechnology (Qingdao) Co., Ltd., and the company's registered address also changed from Beijing to Qingdao, Shandong Province, changing "Beijing" to "Qingdao". In October of the same year, Huayuan Biotech received 300 million yuan in Series B financing from Qingdao Hi-Tech, with a cost per share of 33 yuan, and its post-financing valuation increased to 3.3 billion yuan. This time's name change and "move" are obviously important factors that contributed to the successful completion of this round of financing. This round of signing of
can be understood as an investment promotion in Laoshan District, Qingdao City. The financing is mainly used for the advancement of the second phase clinical trial of Huasui Biotechnology’s platelet-derived growth factor tpg project, as well as the subsequent research and development of multiple blockbuster pipelines.
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Performance losses
Daily operations rely on financing
This financing has a "life-sustaining" effect for Huayuan Biotech, which has not yet had a product on the market. The prospectus shows that in the absence of product commercialization, Huayuan Biotech's operating cash flow and investment cash flow have been in outflows in the past two years, and it mainly relies on financing to maintain operations.
In 2022 and 2023, Huayuan Biotech’s revenue was 0 yuan and 472,000 yuan respectively, corresponding to net losses of 85.926 million yuan and 105 million yuan, a year-on-year expansion of 22.4%. Among them, the revenue in 2023 will come from providing research services related to wound healing medical device projects to a single customer, but this business is not part of the company's core business and the business scale is also very small.
Huayuan Biotech stated that most of its operating losses are mainly caused by R&D expenses and administrative expenses. In 2022 and 2023, its R&D expenses will be 34.818 million yuan and 39.915 million yuan respectively, and administrative expenses will be 44.223 million yuan and 42.117 million yuan respectively. Yuan.
At the same time, its financial costs are also gradually increasing, reaching 7.855 million yuan and 23.582 million yuan respectively during the same period. Among them, the interest on other financial liabilities related to financing redemption liabilities was 7.34 million yuan and 23.17 million yuan respectively.
At the end of 2022, Huayuan Biotech had only 15.765 million yuan in cash reserves, which was no longer able to meet daily operating expenses. After receiving 300 million yuan in financing from Qingdao Hi-Tech, Huayuan Biotech's financial pressure has been significantly relieved, and its cash reserves have increased to 242 million yuan by the end of 2023.
As of the end of March 2024, Huayuan Biotech has cash reserves of 228 million yuan and current liabilities of 101 million yuan.
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The R&D cycle of a single drug exceeds 10 years.
No product has been commercialized yet.
Huaxuan Biotech’s main focus is the discovery, development and commercialization of multi-functional therapies for wound healing. Currently, it focuses on the development of platelet-derived growth factor (PDGF) drugs. Its core products, pro-101-1 and pro-101-2, are recombinant human platelet-derived growth factor-bb (rhpdgf-bb) drugs, which are used to treat burns and scalds and diabetic foot respectively.
pdgf is one of the growth factors secreted by platelets after injury. It can promote, among other things, the formation of new blood vessels, regulate inflammation and stimulate cell proliferation and migration, ultimately accelerating wound healing. Due to the high barriers to PDGF drug R&D and production, there are currently no commercialized PDGF products in China.
As of the end of April this year, Huayuan Biotech’s pipeline includes 10 candidate products. Among them, 7 PDGF candidate products cover a wide range of wound healing indications, including burns and scalds, diabetic foot, fresh wounds, pressure ulcers, radiation ulcers, dry eye syndrome, corneal damage, solar dermatitis, alopecia, hemorrhoids and gastric ulcers; 1 One mRNA product candidate targets solid tumors; two ASO product candidates target brain glioma and triple-negative breast cancer respectively.
It is a consensus that innovative pharmaceutical companies have high investment, long cycle, and high risks in the process of new drug research and development. Huashui Biotech, which specializes in independent research and development, has been established for 12 years, but has not yet commercialized its core products. The development of its fastest-growing pro-101-1 product in China is expected to start phase III clinical trials in the third quarter of 2025, and is expected to be launched in China in 2027.In the United States, an IND (clinical trial application) application will be submitted to the FDA (U.S. Food and Drug Administration) in the first quarter of 2026. The
pro-101-2 product is still in phase II clinical trials and is expected to be completed in the second quarter of 2027. It is reported that the research and development of its pro-101-2 product began in August 2013, which has been more than 10 years ago, and Huasong Biotech plans to launch pro-101-2 in 2030.
The pro-101-3 product for fresh wounds is expected to submit an IND application to the State Food and Drug Administration in the first quarter of 2025; the pro-104 product for hair loss and the aso candidate product for triple-negative breast cancer have been scheduled for IND application By 2029.
is going to Hong Kong for its IPO this time. Huayuan Biotech also wants to raise funds for the continued clinical development of its core products pro-101-1 and pro-101-2.
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Relatives took turns transferring shares
Jia Lijia cashed out a total of 33.25 million yuan
In addition, it is worth noting that in the history of Huayuan Biotech’s equity, Jia Lijia arranged for many relatives to hold shares, and then used "to satisfy personal needs" and family cash flow flexibility needs" to cash out. He himself also cashed out 33.25 million yuan. Except for making a profit when transferring equity to Qingdao Dinhui, the rest were all repurchased at the original price.
In January 2013, Jia Lijia transferred 10% of her equity in Huayuan Biotechnology to Luo Bin and cashed out 1 million yuan. In August of the same year, Jia Lijia transferred 20% of her equity in Huayuan Biotech to Li Desheng and Li Gewei for a total of 2 million yuan.
In January 2015, Luo Bin transferred all 8.33% of his equity in Huaxuan Biotechnology to Wang Kelong's cousin Shao Yubo, worth 3 million yuan. In February 2017, Shao Yubo transferred all this equity to Wang Kelong's cousin Wang Shen, and the value was still 3 million yuan.
In January 2018, Li Desheng transferred all 29.17% of his equity in Huayuan Biotech to Wang Kelong, cashed out 10.5 million yuan, and completely exited. In October of the same year, in order to provide financial support for other business activities, Wang Kelong transferred this part of the equity equally to Jia Lijia's sister Jia Qiuli and Zhang Hongbo, with a value of 5.25 million yuan and 5.25 million yuan respectively.
In October 2020, in order to meet the cash flow flexibility needs of individuals and families, Jia Qiuli transferred 14.58% of her equity in Huayuan Biotech to Jia Lijia for 5.25 million yuan. During the same period, Jia Lijia further transferred this part of the equity to Wang Kelong for a consideration of 5.25 million yuan.
In November 2020, in order to meet the cash flow flexibility needs of individuals and families, Wang Shen transferred 8.33% of his equity in Huayuan Biotech to Jia Qiuli for 3 million yuan, which was the same price as the transfer in February 2017.
Subsequently, Jia Qiuli transferred this part of the equity to Jia Lijia, and further transferred it to Wang Kelong, with the same price of 3 million yuan.
In December 2020, Zhang Hongbo transferred 8% of his equity in Huayuan Biotech to Song Jianqing, cashing out 2.88 million yuan; in August 2021, Jia Lijia transferred part of his equity in Huayuan Biotech to Qingdao Dinghui, Cashed out 25 million yuan.
Attachment: List of intermediaries for the listing and issuance of Huasheng Biologics
Joint sponsor: Huatai Financial Holdings (Hong Kong) Co., Ltd. | CITIC Securities (Hong Kong) Co., Ltd.
Legal advisor: Clifford Chance | Beijing Commerce Law Firm
Auditors and reporting accountants: Ernst & Young LLP
