AI Drug Discovery Unicorn XtalPi Files for Hong Kong IPO, Backed by Tencent and Sequoia, Reports $89M H1 Loss

On November 30, an announcement on the Hong Kong Stock Exchange (HKEX) revealed that QuantumPharm, the holding company of biotech startup and AI drug discovery unicorn XtalPi, has submitted an application for listing on the HKEX. Notably, this marks the second AI pharmaceutical company in China planning to go public on the HKEX, following Insilico Medicine's submission of its listing application in June this year.

AI Drug Discovery Unicorn

Data shows that XtalPi was founded in 2015 as an innovative R&D platform powered by quantum physics, artificial intelligence, and robotics. The company combines 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 material science R&D solutions and services for global corporate groups and innovative companies in industries such as pharmaceuticals and material sciences (including agrotechnology, energy, new chemicals, and cosmetics).

XtalPi's businesses mainly include drug discovery solutions (providing solutions across different modules throughout the entire process of drug discovery and research) and intelligent automation solutions (mainly including solid-state research and development services and automated chemical synthesis services). Among these, drug discovery solutions refer to providing target validation, hit identification, lead generation, lead optimization, and preclinical candidate recommendation., covering multiple types of drugs such as small molecules, antibodies, peptides, ADCs, and PROTACs. Intelligent automation solutions mainly include solid-state research and development services and automated chemical synthesis services, providing standard or customized automation solutions to customers in the pharmaceutical and materials science industries, as well as other sectors.

Currently, XtalPi has more than 700 scientists and technical experts, holding over 120 authorized patents and about 2...Seven ongoing drug discovery projects, with four research and development institutions boasting laboratory space exceeding 10,000 square meters. According to Frost & Sullivan, XtalPi is one of the few companies in the world that simultaneously possesses first-principles calculations based on quantum physics, advanced artificial intelligence technology, and automated wet lab capabilities for drug and materials science R&D. It is also one of the rare quantum physics + AI + automation-driven platforms for drug and materials science R&D globally.

The prospectus shows that currently, XtalPi provides services to more than 100 biotechnology and pharmaceutical companies and research institutions worldwide.Its client base covers 16 of the top 20 biotechnology and pharmaceutical companies globally (ranked by revenue in 2022), including Pfizer, Johnson & Johnson, CT&T, Daewoong Pharmaceutical, and Merck Group.

Investor Lineup is Luxurious, Tencent and Sequoia are Shareholders

Since its establishment, XtalPi has received multiple rounds of financing, with a total amount exceeding 5 billion yuan. Its investors include Tencent, Sequoia Capital China, SoftBank Vision Fund, Google, China Life Equity Investment, SIG Asia Ventures, ZhenFund, 5Y Capital, Neumann Capital, Artisan Partners, PICC Capital, CICC Capital, CMBI Capital, Mirae Asset Global Investments, CITIC Securities Investment, CITIC Capital, Haosong Capital, Shunwei Capital, FountainVest Partners, Parkway Fund, Yiyi Capital, Frees Fund, and Renren Company, among others.

September 2020,XtalPi Raises $318.8 Million in Oversubscribed Series C Financing, Setting a New Record for the Largest Funding Round in the Global AI-Driven Drug Discovery Sector. According to Frost & Sullivan, XtalPi ranks first in total financing among all AI-powered drug discovery companies globally.

Before the IPO, the company's co-founders Shuhaotem Wen, Jian Ma, and Lipeng Lai collectively held 13.45% of the issued shares, granting them the right to jointly control 60.68% of the voting rights at shareholder meetings. Among them, Shuhaotem Wen holds 6.9%, Jian Ma holds 3.82%, and Lipeng Lai holds 2.73%. Additionally, Tencent holds 13.66%, Sequoia holds 13.66%, Five Source Capital holds 7.95%, China Life Chengda holds 7.32%, and PICC Health Pension Fund holds 3.72%.

Net loss of 620 million in the first half of the year

ProspectusThe financial performance of XtalPi shows that its revenues for the years 2020, 2021, 2022, and the first half of 2023 were RMB 35.64 million, RMB 62.80 million, RMB 133 million, and RMB 79.97 million, respectively, with a compound annual growth rate of 93.4% in revenue from 2020 to 2022; the net losses for the corresponding periods were RMB 734 million, RMB 2.137 billion, RMB 1.439 billion, and RMB 620 million, respectively; the adjusted net losses were RMB 122 million, RMB 271 million, RMB 437 million, and RMB 358 million, respectively.

ValueIt is worth mentioning that, compared with Insilico Medicine, the first AI drug discovery company to冲刺港股IPO, the revenues of Insilico Medicine in 2021 and 2022 were respectivelyAmounting to USD 4.713 million (approximately RMB 33.65 million) and USD 30.147 million (approximately RMB 215 million), representing an increase of 539.6%. Meanwhile, from 2021 to 2022,Insilico MedicineAccumulated losses reached $353 million (approximately RMB 2.52 billion).

XtalPiIn terms of specific business revenue, the revenue from drug discovery solutions in 2020, 2021, 2022, and the first half of 2023 was 12.67 million yuan, 39.35 million yuan, 87.67 million yuan, and 36.10 million yuan, respectively, accounting for 35.5%, 62.7%, 65.7%, and 45.1% of total revenue. The revenue from intelligent automation solutions was 22.97 million yuan, 23.45 million yuan, 45.69 million yuan, and 43.87 million yuan, respectively, accounting for 64.5%, 37.3%, 34.3%, and 54.9% of total revenue.

According to the prospectus,In the years 2020, 2021, 2022, and the first half of 2023, XtalPi had 43, 75, 120, and 107 customers respectively during the reporting period.XtalPi's revenue from its top five clients was RMB 29.9 million, RMB 38.8 million, RMB 66.1 million, and RMB 33.1 million, accounting for 83.9%, 61.8%, 49.6%, and 41.4% of the total revenue during the same periods, respectively.

In 2020, 2021, 2022, and the first half of 2023, XtalPi's R&D expenditures were 0.84 billion yuan, 2.13 billion yuan, 5.39 billion yuan, and 2.34 billion yuan, respectively, accounting for approximately 234.4%, 338.5%, 269.2%, and 293.1% of each period’s revenue. As of June 30, 2023, XtalPi had cash and cash equivalents.The liquid portion of term deposits, restricted cash, and financial assets measured at fair value through profit or loss amounted to 3.211 billion yuan. In addition, as of September 30, 2023, XtalPi also had 290 million yuan in bank financing.

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