AI Drug Discovery Pioneer Plunges Below IPO Price; Mindray Posts Weakest Q3 Report; Pharma Giants Rush to Acquire PD-(L)1 Bispecific Antibodies

A Total of 3 Brief News Items | Estimated Reading Time: 3 Minutes◆◆ ◆

01

The First AI Pharmaceutical Stock, Breaks Issue!

On November 18, 2024, XtalPi, a Hong Kong-listed company, saw its stock price plummet by 14.49%, closing at HK$4.58 per share, which is significantly lower than its initial public offering price of RMB5.28 per share.

Once a highly sought-after "AI pharmaceuticals first stock," it has finally reached the point of falling below its issue price.

Public information shows that XtalPi has provided services to more than 300 pharmaceutical enterprises or institutions worldwide, including some of the world's leading biotechnology and pharmaceutical giants.

However, from the perspective of the company's revenue, the unit price per customer of "AI CRO" is not high at all, and the revenue scale is also relatively small.

From 2021 to 2023, XtalPi achieved annual revenues of 62.8 million yuan, 133 million yuan, and 174 million yuan, respectively.

This revenue scale, even when compared among CRO companies in the A-share market, is still considered a "tiny" type.

However, the company's loss volume is significantly much larger compared to its revenue volume.

From 2021 to 2023, XtalPi's operating losses were RMB 299 million, RMB 525 million, and RMB 722 million, respectively.

Over three years, the loss exceeded 1.5 billion.

In the first half of 2024, XtalPi's revenue was 103 million yuan, with a staggering loss of 1.238 billion yuan.

This is also an awkward portrayal of the current AI pharmaceuticals track: the concept is hot, the operating costs are extremely high, but its substantial output is still far from meeting people's previous expectations.

Taking XtalPi as an example, since its establishment 10 years ago, its valuation has soared from 8.3 million yuan before the Pre-A round of financing in 2015 to 1.968 billion US dollars (approximately 14.034 billion yuan) after the D round of financing in 2021, increasing 160 times in 6 years.

The core factor supporting this astonishing increase is the industry's overly optimistic imagination and expectations for AI drug development.

However, until now, "AI pharmaceuticals" still exists merely as an attractive concept, still lacking hardcore achievements that can be showcased.

Globally, although the concept of "AI drug discovery" has been popular for many years, there is currently no AI-designed drug officially on the market, and even AI-designed drugs that have entered Phase III clinical trials are extremely rare.

(Source: Pharma Investment Tribe)

02

Mindray's Weakest Q3 Report in History

Mindray disclosed the weakest third-quarter report in its history.

In the third quarter of this year, Mindray's revenue increased by only 1.43% year-on-year, and its net profit even plummeted by 9.31%. Affected by the third quarter, Mindray's net profit in the first three quarters of this year increased by only 8.16% year-on-year, making it difficult for the company to maintain its previous growth trend of over 20%.

Throughout the third quarter, almost all medical device companies delivered disappointing performance, not just Mindray alone. Affected by the rectification in the healthcare sector, procurement by many hospitals was postponed. Additionally, tight funding for hospital construction and weak non-essential medical demand directly led to a downturn in domestic performance for medical device companies in China.

Whether it is Mindray or other medical device giants, their performance has declined to varying degrees. However, this is not due to a deterioration in the fundamentals of the companies but rather because of short-term fluctuations in demand. Based on this, although Mindray's performance did not meet expectations, the market still believes that its core competitiveness remains sufficiently strong.

As the company's performance slows down, Mindray's management generously carried out a large-scale dividend distribution in the third quarter: RMB 16.5 per 10 shares. Notably, this is Mindray Medical's second large-scale dividend distribution this year, as the company implemented a dividend plan of RMB 40.6 per 10 shares in the mid-year report. In just three quarters, Mindray Medical has cumulatively distributed cash dividends totaling RMB 6.907 billion, accounting for 64.9% of the company's attributable net profit.

Since its listing, Mindray's dividend payout has continued to increase, soaring from 1.216 billion yuan in 2018 to 7.05 billion yuan in 2023. The ratio of dividends to the annual profit has grown from 32.7% to 64.9%. Under the sustained high growth, Mindray's dividend yield has reached 2.63%, which is already very attractive given that bank deposit rates have generally fallen below 2%.

The main reason why Mindray's stock price hasn't fallen further lies in its continuously increasing dividend payouts. Although many investors still consider Mindray Medical as a growth stock, it has also developed the characteristics of a mature company with high dividends, which is the core reason why the market has been so tolerant of its slowing performance.

(Source: Yi Yao)

03

Pharmaceutical Giants Rush to Acquire PD-(L)1 Bispecific Antibodies

In September 2024, Akeso Biopharma presented重磅研究数据 at the 2024 World Conference on Lung Cancer regarding the registrational Phase III clinical study (HARMONi-2/AK112-303) comparing ivonescimab monotherapy (PD-1/VEGF bispecific antibody) versus Merck's pembrolizumab monotherapy as first-line treatment for locally advanced or metastatic non-small cell lung cancer (NSCLC) with positive PD-L1 expression (PD-L1 TPS≥1%).

Two months later, Merck also purchased a PD-1/VEGF bispecific antibody: LM-299.

In addition to Merck, several other major pharmaceutical companies have also invested in PD-(L)1 bispecific antibodies. The field has seen continuous transactions over the past two years, with Chinese Biotechs being the main transferors.

PD-1 and VEGF are often upregulated and co-expressed in solid tumors. Anti-VEGF drugs synergize with immune checkpoint inhibitors (ICIs) in promoting tumor vessel normalization and stimulating immune activation.

Akeso's great success in the HARMONi-2 study demonstrates the potential of PD-(L)1/VEGF bispecific antibodies to iterate over PD-1 monoclonal antibodies.

Currently, Ivonescimab has been approved for marketing in China. It is used in combination with pemetrexed and carboplatin to treat patients with locally advanced or metastatic non-squamous NSCLC who are positive for EGFR gene mutations and have progressed after treatment with epidermal growth factor receptor (EGFR) tyrosine kinase inhibitors (TKIs). An application for the marketing of Ivonescimab as a first-line treatment for PD-L1 positive (TPS≥1%) NSCLC patients has also been submitted.

Other PD-(L)1/VEGF pipelines in clinical stages are also almost all from China, thus triggering a wave of overseas licensing for domestically produced PD-(L)1/VEGF drugs.

But PD-1 monoclonal antibodies still face issues such as low response rates, safety, and drug resistance. Therefore, the development of a new generation of immunotherapy is highly anticipated by the market. Currently, PD-1/VEGF bispecific antibodies have taken the lead, and more surprises in this field are expected.

(Source: Pharma Intelligence Network)