Rongchang Bio’s CDMO business, Maibari, will be listed independently, which has aroused strong attention in the industry.
On September 28, the Shenzhen Stock Exchange announced that it has accepted the listing application of Yantai Maibari National Biomedical Co., Ltd. for the GEM IPO.
This impact on the capital market, MaiBairui plans to raise 1.6 billion yuan, of which 1.12 billion yuan will be used for the construction project of biomedical innovation center and operation headquarters, 4.8 100 million yuan will be used to supplement working capital. Maibari is one of the few companies in the world with full-chain CDMO services from ADC, and the financing hopes to expand its business scope.
However, Maibari and Rongchang Biological are closely related in terms of senior management, business income, and plant construction. In November 2021, when Rongchang Biotech hit the STAR Market, the Shanghai Stock Exchange paid attention to the independence of the CDMO business of Maibari and whether there was a related transaction with Rongchang Biotech.
Rongchang Bio explained at the time: Rongchang Pharmaceutical, Rongchang Bio, and Microbary may have overlapping customers and suppliers, but their operations and management are independent, and there is no common procurement and sales channels. situation. But in fact, Rongchang Bio has been the largest customer of Maibari since 2021, accounting for more than 14.06% of the total business.
The industry generally believes that the relationship between Maibari and Rongchang Biotechnology is too close, and the issues such as horizontal competition and related transactions involved may be questioned by regulators in the subsequent review process.
Gross margin lower than peers
Rongchang Biotech and Microbary were the first to be one body. In 2008, Rongchang Biotech spent huge sums of money to replace a large number of equipment in order to develop a series of new biological drugs, and in 2013 Microbary was established, and successively built platforms for two core technologies, CHO and ADC.
ADC drugs involve three parts: macromolecules, small toxin molecules and linkers, and the process is complex. 70%-80% of ADC production work worldwide is handed over to CDMO institutions to complete . CDMO mainly provides production and OEM services for pharmaceutical companies.
Mabray’s expertise lies in the CDMO of ADC drugs, from cell bank establishment, drug conjugation, medium development, new drug registration design, clinical trial reagents to large-scale production of products, It is “strive to build” one-stop new drug R&D and production capacity.
“One-stop shop” is the most concerned factor in ADC drug manufacturing. Because the production processes of large and small molecules are completely different, and special technology is required to connect the two together, General CDMO companies do not have the ability to produce three parts at the same time. Maibari also only “strives for” one-stop CDMO production.
According to the Frost & Sullivan analysis report, McBride currently ranks second in the total scale of bioreactors among domestic biopharmaceutical CDMO companies. No.1 is WuXi Biologics. In May 2021, WuXi Biologics and WuXi AppTec’s small-molecule CDMO subsidiary Hequan Pharmaceutical jointly established WuXi Helian, which is engaged in the development of ADC drugs. CDMO business.
However, Maibrai, which relies on Rongchang Bio, is obviously more stable in business than WuXi United. At present, Rongchang Bio has a number of products approved for the market, and the products have been sold overseas. Midbury itself also has business with many multinational pharmaceutical companies, so Rongchang Bio is confident to launch it on the capital market alone.
According to Maibari’s prospectus, from 2019 to the first three months of 2022, the company’s operating income was 109 million yuan, 217 million yuan, 388 million yuan and 46.8142 million yuan respectively; After Rongchang Bio ADC is approved for listing in 2021, it will have achieved positive profits and will no longer lose money.
However, Midbury’s gross profit margin is significantly lower than its peers. Up to now, the highest gross profit margin of Maibari is only 39.22%, but the lowest in the CDMO industry can reach more than 50%.
It will take more time for Maibari to break through in the CDMO field and catch up with competitors such as WuXi Biologics and Asymchem.
Governance in crisis
What the industry is more concerned about is: Is there a major dependence on the relationship between Maibari and Rongchang Biotechnology, which affects the development process?
As the largest shareholder of Microbary, Rongchang Biotech has transferred 49% of the shares of Microbary to Rongchang Biotech in January 2017 at a price of 73.5 million yuan Controlling shareholder, who no longer has control over it.
However, as of the disclosure date of the prospectus, Mabray has no controlling shareholder, Wang Weidong, founder of Rongchang Group, Fang Jianmin, CEO of Rongchang Bio, Lin Jian, Wang Liqiang, Wang Xudong, Deng Yong, Xiong Xiaobin, Wen Qingkai, Yang Minhua and Wei Jianliang are the joint actual controllers.
These shareholders, together with Yantai Rongchang Partnership, Yantai Zengrui, Mabplex Holding, Yantai Hengrong, Yantai Jianshun, Yantai Yirui, Yantai Yida and Yantai Jichang, control a total of 32.95% of the voting rights of the company through direct or indirect means. According to the company’s data, these small shareholders are all partnership enterprises, and the general partners behind them are almost all executives of Rongchang Group and Rongchang Biotechnology.
This shareholding structure is relatively scattered, and Maibari also reminded in the prospectus that If the cooperative relationship between the common actual controllers changes, the company will face the risk of changes in control /strong>.
China’s innovative drug field fluctuates greatly. Many scientists start their own businesses, and many pharmaceutical companies shrink their pipelines and lay off employees. In Maibari’s current shareholding structure, Once there is a disagreement between the actual controllers, it is easy to cause instability of the company and affect the normal development of the business.
Rongchang Biotech started with ADC drugs, and MicroBairy was also engaged in the CDMO business of ADC drugs at the beginning. However, after years of development, Maibari has comprehensively covered many fields of biomedicine. As of the end of March 2022, the company has covered more than 120 different types of domestic and foreign customers, and has undertaken more than 160 CDMO service projects in different stages.
The global demand for CDMO business is increasing rapidly, and innovative pharmaceutical companies such as Innovent Bio, Henlius, and Betta Pharmaceuticals have extended their CDMO business sector, which has become a new trend in the development of innovative pharmaceutical companies. However, due to the homogeneous R&D in the CDMO business, the industry is more worried: Once the production capacity is overcapacity, how will these heavy assets be digested?
Using China’s cost advantage to seize the market share of developed countries in Europe and the United States is the main way of survival for CDMO companies today. According to industry estimates, in 2022, the scale of China’s pharmaceutical CDMO market may reach 57.9 billion yuan, of which the chemical drug and biological drug CDMO market scale may reach 39 billion yuan and 18.9 billion yuan respectively.
Of course, CDMOs also carry huge risks. Previously, the United States has launched the “National Advanced Manufacturing Strategy”, focusing on local bio-manufacturing capabilities and rising to the height of national security. CDMO business that relies heavily on overseas markets may be hindered in the future.
Maibari has the support of Rongchang Biotechnology and may be better than its peers. Splitting the CDMO business for listing marks another way of thinking in the innovative drug industry. Henlius, 3SBio, etc. have clearly opened up CDMO business; Junshi Biotechnology, BeiGene, etc. also have huge production capacity of biological drugs and chemical drugs, and more companies may open up new fronts.
Writing | Lei Gong
Editing｜Jiang Yun Jia Ting
Operation | Twenty-Three
#Innovative Pharmaceutical Enterprise##Chinese MedicineCDMO#