XtalPi Becomes First 'Chapter 18C' Specialized Tech Company Listed on HKEX, Valued Over HK$21 Billion

Jun 13, 2024 10:39 CST Updated 10:39

XtalPi

Computation-Driven Innovative Drug R&D Provider

Aiming to become an outstanding enterprise that values both social and commercial worth.

This article is an original piece by IPO Early Insights.

Author｜Stone Jin

WeChat Official Account | ipozaozhidao

According to IPO Early Insights, QuantumPharm Inc. (hereinafter referred to as "XtalPi") officially listed on the Main Board of the Hong Kong Stock Exchange under the stock code "2228" on June 13, 2024.

This means that XtalPi has become the first technology company to go public under the new rules for specialized technology listings (referred to as "Chapter 18C") since its introduction on March 31, 2023. Chapter 18C primarily targets companies with specialized technology, imposing high requirements on the technological attributes of the industry. It covers sectors such as next-generation information technology, advanced hardware and software, advanced materials, new energy and energy conservation, and new food and agricultural technologies.

XtalPi Holdings Limited issued 187,373,000 shares in this IPO. Among them, the Hong Kong public offering portion was oversubscribed by 103.35 times, while the international offering portion was oversubscribed by 2.13 times.According to "IPO Early Sense," well-known international long-term investors, healthcare-focused funds, and hedge funds from China, Europe, the US, and the Middle East participated in the cornerstone investment. This is also the only company in the past two years, among issuances exceeding $50 million, to achieve over 100 times HKPO subscription.

To a certain extent, successfully becoming the "first 18C stock" and simultaneously the "first AI pharmaceuticals and AI + robotics stock" on the Hong Kong Stock Exchange not only confirms that XtalPi's technical roadmap and business model have gained recognition from the capital market and relevant departments, but also is likely to bring more investor attention to XtalPi. This will provide stronger support and a clearer competitive edge for the ongoing business development and commercialization process of this platform enterprise, which has heavily invested in building a unique technological barrier.

It is worth noting that,Successful Lotus, IntelliMed, Mammoth Medical Solutions, Haitang No.1, Professor Bradley L. Pentelute, Ginkgo Fund I, Biocytogen, and FaaS Capital Longevity Limited, among eight cornerstone investors, participated in this offering, with a total subscription amounting to HKD 337 million. The investors encompass well-known figures from the investment communities in Hong Kong and mainland China, the Brunei royal family, a star professor from MIT, as well as seasoned investors from the pharmaceuticals industry.

Specifically: Successful Lotus is wholly owned by Dr. Li Jiayi, Chairman and Managing Director of Henderson Land Development Co., Ltd.; IntelliMed is managed by Zhenmai Investment, whose founder Wang Ting was previously a partner at OrbiMed, the world’s largest investment fund focused on the biopharmaceutical sector; Mammoth Medical Solutions is a Brunei-based medical and pharmaceutical company backed by the Brunei royal family; Haitang No. 1 is managed by Haishan Asset Management Co., Ltd. (“Haishan”) as its general partner and investment manager, with Haishan being controlled by a wholly-owned subsidiary and controlled entity of Shanghai Guosheng Capital Management Co., Ltd.; Professor Pentelute is a chemistry professor at MIT, recipient of the Eli Lilly Biochemistry Award, and an associate member of the Broad Institute of MIT and Harvard, with over a hundred publications to his name and active involvement in biopharmaceutical venture capital; Ginkgo Fund I is wholly owned by Gong Hongjia, a well-known Chinese angel investor; Biocytogen is a fully human antibody discovery platform based on mouse models and has business collaborations with XtalPi; FaaS Capital is a multi-family office and private equity investment management firm established by the Daohe Jinyu Fund of Funds team, one of China’s top ten market-oriented funds of funds.

As of 10:15, XtalPi was trading at HK$6.40 per share, up 21.21% from its offering price, with a market value exceeding HK$21.8 billion.

Wen Shuhao, Co-founder and Chairman of XtalPi, said at the listing ceremony: "XtalPi's goal is to become an outstanding company that values both social and commercial significance, building a new infrastructure for future industry R&D with AI and robotics technology. After going public, XtalPi will continue its business philosophy of 'helping others is helping oneself,' empowering R&D innovation for global clients, and committing to infuse AI (love) into every new drug and create more AI (love)-powered new materials that benefit humanity."At the same time, Wen Shuhao encouraged more technology innovation companies to utilize the Hong Kong Stock Exchange's 18C rules for listing in Hong Kong, jointly fostering trillion-dollar enterprises in the AI era and bringing new vitality to the Hong Kong market.

AI + Robotics Empowering AI for Science

Covering 16 of the top 20 global pharmaceutical companies

Founded in 2015, XtalPi has built a world-leading innovative R&D platform powered by quantum physics, artificial intelligence, and robotics. XtalPi’s platform integrates first-principles calculations based on quantum physics, advanced artificial intelligence, high-performance cloud computing, and scalable and standardized robotic automation to provide drug discovery and materials science R&D solutions and services for global enterprises and innovative companies in industries such as pharmaceuticals, materials science (including agtech, energy, novel chemicals, and cosmetics).

According to Frost & Sullivan, XtalPi is one of the few drug and materials science R&D companies in the world that simultaneously possesses first-principles calculation based on quantum physics, advanced artificial intelligence technology, and automated wet lab capabilities. It is also one of the rare quantum physics + AI + automation-driven drug and materials science R&D platforms globally.Such a unique combination of technologies has made XtalPi a notable industry benchmark in both software and hardware. The algorithms on the software side and the large-scale robotic laboratories on the hardware side share a core objective: to predict or synthesize functional molecules with efficiency, precision, and throughput surpassing human capabilities, while accumulating high-accuracy data to continuously enhance platform upgrades. This technological approach demonstrates XtalPi's industry ambition and technical foresight in the era of large models.

As of May 29, 2024, XtalPi has achieved a 100% success rate in all crystal structure prediction projects for small molecules. Its integrated technology platform has utilized over 700 million core hours of cloud computing and has contributed to more than 500 projects. According to Frost & Sullivan, XtalPi is one of the few companies globally capable of achieving such computational accuracy, while the average industry success rate for crystal structure prediction ranges between 86% and 93%.

The performance gap ranging from 86% to 100% might be the reason why XtalPi continues to secure orders from large pharmaceutical companies, reflecting the potential of XtalPi's R&D platform in accelerating the drug development process.

The prospectus shows that XtalPi helped Pfizer accelerate the development of Paxlovid, the world's first COVID-19 oral therapy to receive FDA approval. XtalPi completed the mutual verification and precise matching of drug crystal structure predictions with experimental results in just six weeks, enabling subsequent development and production. In another case of biomaterials research and development, within four months, XtalPi and its collaborators successfully developed a new type of bio-based furan surfactant superior to commonly used petroleum-based surfactants.

For instance, in April 2023, XtalPi reached a US$250 million AI-powered small molecule drug discovery collaboration with a global leading pharmaceutical company headquartered in Indianapolis, Indiana (actually "Eli Lilly"). This collaboration will leverage AI capabilities and an automated robotic platform to design and deliver a novel compound from scratch for the development of a drug candidate.

In fact, since its establishment, XtalPi has been providing services to and collaborating with many global biotechnology and pharmaceutical enterprise groups, such as Pfizer, Johnson & Johnson, Merck Group of Darmstadt Germany, China's Chia Tai Tianqing Pharmaceutical, and Daewoong Pharmaceutical of South Korea.

As of May 29, 2024, XtalPi has provided services to more than 300 biotechnology and pharmaceutical companies and research institutions worldwide, including 16 of the top 20 biotechnology and pharmaceutical companies globally (ranked by revenue in 2022). It has also established strategic partnerships with globally renowned biotechnology and pharmaceutical enterprises, national research institutions, and government bodies such as Pfizer, CK Life Sciences, and Singapore's national platform for drug design and discovery (EDDC).The selection by so many cutting-edge enterprises and research institutions is not only a result of the dividend brought by the first-mover advantage, but also a testament to the advanced nature of its technical platform on a global scale.

Another point that needs to be highlighted is that in the AI pharmaceuticals sector, XtalPi has opted for an innovative platform business model rather than building its own pipeline. Additionally, it has invested in and incubated a series of innovative biopharmaceutical companies along the upstream and downstream industrial chain, including Geode, Muda Bio, Signet Biotech, Metis Medicine, PhoreMost, CytoCan, Comed Biotech, LaMont Biotech, Newborn Biotech, and ZhenTai Biotech. These companies are not only clients utilizing XtalPi's R&D solutions but also contribute to the long-term growth points of drug pipelines. Meanwhile, XtalPi avoids the heavy asset and high-risk clinical trials while continuously benefiting from milestone payments during clinical stages and sales sharing from the pipeline through extensive R&D collaborations to diversify risks.

Expand into high-value areas that rely more on advanced technology.

Global Perspective Helps It Take the Lead in Global Strategy

Thanks to the combination of computational power based on quantum physics with advanced artificial intelligence,Besides drug discovery, XtalPi has now launched the XtalPi R&D Solutions project to explore other high-value areas that rely on advanced technologies, such as materials science (including agrotechnology, new chemicals and energy, and cosmetics), thereby diversifying its services and achieving business growth. Meanwhile, XtalPi has established a joint venture and, through this joint venture, introduced the UpChemist.AI platform to leverage quantum physics-based computing, artificial intelligence, and intelligent automation capabilities, expanding its business into the field of materials science R&D.

According to the prospectus, XtalPi is currently collaborating with a top university on battery research and development automation, primarily focusing on the automation of battery electrolyte formulation and performance testing. The battery R&D automation project aims to achieve rapid iteration of automated battery electrolyte formulation processes, reduce experimental costs, and shorten experimental cycles through automatic weighing and mixing, high-throughput ingredient preparation, and automatic formula recording. These new businesses have not yet been included in the financial forecasts outlined in the prospectus.

Of course, the aforementioned continuous breakthroughs are, to a certain extent, still attributable to XtalPi's continuous investment in independent research and development over the past nine years. As of December 31, 2023, XtalPi's R&D team is led by three co-founders with Ph.D. backgrounds from MIT and consists of more than 500 scientific researchers and technical experts. Among them, approximately 124 employees hold Ph.D.s in various fields such as artificial intelligence, physics, chemistry, biology, medicinal chemistry, organic chemistry, physical chemistry, biochemistry, and computational biology. As of the same day, more than 50% of XtalPi’s employees hold a master’s degree or higher.

From 2021 to 2023, XtalPi's research and development expenditures were RMB 214 million, RMB 359 million, and RMB 480 million, respectively, accounting for approximately 338.5%, 269.2%, and 275.6% of each period's revenue. As of December 31, 2023, XtalPi owned over 160 authorized patents.

It is worth mentioning that, as Chinese companies are all seeking to expand overseas today, XtalPi, founded at MIT, has a natural international advantage and has long established a local sales team and robotics laboratory in Boston.To better implement its global expansion strategy, XtalPi has established an innovation demonstration laboratory in Boston, Massachusetts, to further showcase its R&D capabilities, providing solutions and services in the local U.S. market. It also plans to set up a larger-scale robotic laboratory ("Somerville Robotic Laboratory") in Somerville, Massachusetts, in the third quarter of 2024, to serve its global customers and expand its existing collaborations with business partners in North America.

At the same time, as an innovative technology company headquartered in the Lok Ma Chau Loop Hong Kong-Shenzhen Innovation and Technology Park, XtalPi aims to continue leveraging its geographical advantages to seize the opportunities brought by the joint promotion of the biotechnology and pharmaceutical industries by Shenzhen and Hong Kong. In addition, XtalPi also plans to expand its business in Southeast Asia and the Middle East. As of May 29, 2024, XtalPi is conducting multiple ongoing projects with a Singapore national research institute on drug discovery solutions and using its automation technology to ultimately establish library synthesis capabilities for one of the related academic institutions. As of the same day, XtalPi is also engaged in strategic cooperation negotiations on automated wet lab experiments with a globally leading petrochemical group in the Middle East, and discussing drug discovery collaborations and chemical synthesis opportunities with a leading pharmaceutical company in Saudi Arabia, aiming to launch these projects before the end of 2024.

With Five Leading Senior Independent Investors

Witnessing XtalPi's JourneySense of Mission, Growth Potential, and Enormous Promise

As of December 31, 2023, XtalPi has cumulatively raised approximately US$732 million, ranking first in total financing among all AI-powered drug discovery companies globally.Under the 18C new regulations, XtalPi has five leading senior independent investors, including Image Frame (Tencent) and Sequoia.China, WuYuan Capital, GuoShou ChengDa, and RenBao Health Pension Fund.

InLiu Qin, Founding Partner of Wu Yuan CapitalIt seems that,In recent years, with the rapid development of artificial intelligence and the reduction of computing costs, the pharmaceutical research and development industry has ushered in a technology-driven qualitative change. XtalPi has taken the lead in combining quantum physics, artificial intelligence, and biomedicine, redefining an entirely new paradigm for drug discovery. XtalPi has demonstrated strong conviction in this cutting-edge direction and has continuously delivered phased results, growing into a representative and leading enterprise in the AI-driven drug research and development field.

"In the development process of XtalPi, we have witnessed a sense of mission, growth potential, and enormous promise that an innovative enterprise embodies. We believe the IPO marks a new starting point for XtalPi. XtalPi will continue to lead industry transformations with its cutting-edge technology and interdisciplinary innovative concepts, advancing human life sciences into a new era. Best wishes to XtalPi!" said Liu Qin.

Jing Xutian, Managing Director of Wu Yuan Capital, further pointed out, "While we are enjoying the great convenience brought by technology in the information world, our needs in the physical world are still far from being met: how to obtain a more effective drug, how to develop better-performing chemical products or energy materials are still goals that countless companies and engineers are constantly striving for.

And with the rapid development of information technology, especially artificial intelligence, XtalPi has integrated physical computing and automated robotics to build a bridge between the information world and the physical world. Through feedback learning, it continuously optimizes its closed-loop system, enabling highly efficient material discovery and optimization. We are already pleased to see significant technical validation and initial commercial success in fields such as biomedicine and materials chemistry.We believe that under the huge vision and determination of the founding team, combined with the richer financing channels brought by the IPO of 18C, even though continuous R&D investment is still needed in the short term, XtalPi will eventually prove its significant value to the industry and society.”

Fengrui has been accompanying for 8 years, Shunwei and Yunjiu are both shareholders.

Looking forward to XtalPi's continued advancementDigital and Intelligent Revolution

Since its establishment, XtalPi has also received investments from dozens of well-known institutions, including Artisan Partners, Huaxing Capital, CICC Capital, CITIC Capital, CMB International, K2 Investment, Frees Fund, Google, Harvest Fund, Hexuan Capital, IMO Ventures, Mirae Asset, Haixun Capital, OrbiMed, Shunwei Capital, SIG, Sky9 Capital, SoftBank Vision Fund, and ZWC Partners.

Fengrui Capital founding partner Li Feng recalled that he first met Wen Shuhao (Note: Co-founder and Chairman of XtalPi) ten years ago at a startup roadshow organized by MIT-CHIEF in Boston. Li Feng was deeply impressed by this postdoctoral physicist from MIT and was very interested in the direction of computational biology that Wen aspired to pursue, expressing investment interest at the time.“The continuous decline in computing power costs and the ongoing enhancement of computational capabilities have the potential to drive the evolution of computational biology, and also hold significant value in the broader field of materials science."."Feng Li believed.

However, Li Feng also admitted that in 2015, when XtalPi started, and the following year 2016, whether in Boston, the global highland of the biopharmaceutical industry, or in China's rapidly developing venture capital circle, the emerging field of computational biology still faced widespread controversy. "For the drug-making process, people are more accustomed to studying from the perspective of traditional biology dominated by experience and experiments. From the perspective of physics and computation, the general evaluation within the industry is 'rather marginal' or 'less impactful.'"

In 2016, after Li Feng founded Frees Fund and completed the fundraising for its USD fund, Frees Fund became the Series A investor of XtalPi.

Partner of Frees FundMa RuiEmphasizeAs one of the earliest teams able to harness computation and AI to enhance the efficiency of drug discovery, the founding team of XtalPi has always firmly believed in the future of AI-driven pharmaceuticals. It is this strong determination, coupled with the continuous ability to deliver results, that has enabled XtalPi to gain support from many clients and investors.

"Congratulations to XtalPi on its successful listing! Standing at the new starting point of Hong Kong Stock Exchange's 18C chapter, we hope that XtalPi will continue to do what is right rather than easy, becoming an outstanding company that values both social and commercial impact. Gen AI (Generative AI) represents the greatest technological breakthrough of our time, and ‘AI + biomedicine’ is one of the most important applications of Gen AI. By introducing embodied intelligence robots into biochemical laboratories and applying generative AI to drug discovery, we look forward to seeing XtalPi continuously empower companies within its ecosystem, bringing forth new drugs and innovative materials." Ma Rui added.

Shunwei Founding Partner and CEO David Xu said: "Congratulations to the XtalPi team. The listing of XtalPi marks the perfect integration of technological innovation, social responsibility, and the market. Since its establishment, Shunwei has always adhered to the investment philosophy of focusing on technological innovation, committed to discovering and supporting technical projects with disruptive potential, and invested in XtalPi's Series C financing round in 2020. We have witnessed the XtalPi team’s exploration in AI-driven drug research and development, guided by their mission of ‘infusing AI into every new drug and helping patients access effective treatments more quickly.’We firmly believe that through continuous technological innovation, XtalPi can not only drive the digital and intelligent transformation in the fields of life sciences and new materials, but also bring more innovative achievements and new momentum for social development worldwide.”

Cao Darong, founding partner of CloudNine Capital, stated: "XtalPi is a pioneer in the field of AI-driven drug discovery in China and also the first hard-tech company to go public under Rule 18C. As an investor in XtalPi, today, both myself and the entire CloudNine Capital team are thrilled and honored. Over the past nine years since its establishment, the company has consistently adhered to a technology-driven philosophy, committed to accelerating drug discovery and development through artificial intelligence and robotics. Particularly during the COVID-19 pandemic, XtalPi actively contributed to the development of antiviral drugs, playing a crucial role in combating the pandemic."We look forward to the company continuing to maintain its excellent innovation capabilities and market competitiveness in the future journey, further promoting the application of artificial intelligence and robotics experiments in drug research and development, and bringing more treatment options and hope to patients.。”

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