Two More Pharma Companies Halt IPOs Amid Regulatory Countercyclical Adjustments

　　【Pharmaceutical Network Industry Dynamics】Under the counter-cyclical adjustment of regulation, a new dynamic balance in the IPO market seems to be taking shape. According to statistics, since 2024, only four IPO companies have passed the review, while more than 16 projects have been withdrawn or rejected. In the pharmaceutical field, several pharmaceutical companies' IPOs have been terminated since 2024. Reportedly, on January 16, two more pharmaceutical companies' IPOs were terminated.
 

On January 16, the IPO of Shanghai Hanyu Medical Technology Co., Ltd. (referred to as “Hanyu Medical”) was terminated. Hanyu Medical had planned to list on the Sci-Tech Innovation Board. Hanyu Medical originally intended to raise 1.722 billion yuan, which was to be used for production base construction projects, R&D center construction and registration trial projects, marketing network construction projects, and replenishment of working capital.
 

On January 16, according to the review project updates from the Beijing Stock Exchange, the IPO review status of Kangya of Ningxia Pharmaceutical Co., Ltd. (referred to as "Kangya") was marked as "terminated." In this IPO attempt, Kangya originally planned to issue no more than 15 million ordinary shares to unspecified qualified investors (without considering the over-allotment option), intending to raise approximately 163 million yuan for the R&D center upgrade and construction project and the innovative drug technology platform construction project.
 

Data shows that Hanyu Medical mainly engages in the research, development, production, and commercialization of structural heart disease interventional devices and electrophysiology products. In the field of structural heart disease interventional devices, the company’s ValveClamp product is a mitral regurgitation interventional treatment device included in the special approval process for innovative medical devices and is expected to become the first domestically produced product of its kind to be approved for marketing in China. In terms of performance, the prospectus reveals that Hanyu Medical's revenue for 2019, 2020, and 2021 was 0 yuan, 49 yuan, and 3.4054 million yuan, respectively; net losses were 49.19 million yuan, 162 million yuan, and 195 million yuan, respectively; and net losses after deducting non-recurring items were 56.444 million yuan, 90.698 million yuan, and 114 million yuan, respectively.
 

The prospectus shows that Kangya is a comprehensive pharmaceutical enterprise driven by pharmaceutical R&D, focusing on the field of chemical medicines, with coordinated development in chemical medicine manufacturing and pharmaceutical contract outsourcing services. In 2020, 2021, and 2022, the gross profit margin of Kangya's main business was 78.80%, 74.68%, and 73.15%, respectively. Given that the gross profit margin is affected by various factors such as macroeconomic conditions, industry status, changes in customer demand, and production costs, the company’s gross profit margin carries fluctuation risks.
 

In addition, according to the review, on January 8, the Shanghai Stock Exchange showed that the Sci-Tech Innovation Board listing application of Shanghai Ark BioPharmaceutical Technology Co., Ltd. was terminated, with a planned fundraising of 1.997 billion yuan. On January 3, the Shanghai Stock Exchange announced that due to Daqing Huali Biotechnology Co., Ltd. withdrawing its issuance and listing application and the sponsor revoking its sponsorship, the Shanghai Stock Exchange terminated the review of Huali Biotech's issuance and listing in accordance with relevant regulations. On January 2, the website of the Shanghai Stock Exchange also published the decision to terminate the review of the initial public offering of Aosikang Biotechnology (Nantong) Co., Ltd. and its listing on the Sci-Tech Innovation Board.
 

From the performance at the beginning of 2024, the IPO market in the pharmaceuticals industry may show a slowing trend. Regarding the reasons for IPO terminations, based on disclosed information and issues that have drawn regulatory inquiries, some cases involve high sales expenses, doubts about the sustainability of performance, or hard issues within the companies themselves such as related-party transactions or penalties.
 

Analysts pointed out that the current IPO pace has slowed significantly, mainly due to the need to balance the primary and secondary markets, strengthen counter-cyclical adjustments, and tighten IPOs on a phased basis for all industries, including the pharmaceuticals sector. The wave of IPO withdrawals is also related to fluctuations in the biopharmaceutical industry cycle. In previous years, over-investment in China's biopharmaceutical sector led to a certain degree of "bubble," and now the industry is gradually returning to a more rational state.
 

Other sources indicate that due to the intertwining of various factors, the pace of biopharmaceutical companies going public has significantly slowed down. However, from the current perspective, an IPO is not the ultimate goal for investors and entrepreneurs; it is merely a phased milestone. Now, the threshold for this milestone has been raised, and both investors and entrepreneurs need to make adjustments. On a macro level, they should actively understand the needs of the country, while in practice, investors and entrepreneurs must strengthen their own capabilities, address internal deficiencies, and enhance their competitive edge in the market.
 

Disclaimer: In any case, the information or opinions expressed in this article do not constitute investment advice to any person.