Interface News reporter |
Interface News Editor |Xie Xin
On November 30, AI pharmaceutical unicorn XtalPi officially submitted its listing application to the Hong Kong Stock Exchange, with CITIC Securities as its exclusive sponsor.
This is the second AI pharmaceutical company in China planning to list on the Hong Kong Stock Exchange. Just six months ago, The Paper reported,Another AI pharmaceutical company, Insilico Medicine, submitted its listing application to the Hong Kong Stock Exchange on June 27, with Morgan Stanley and CICC as its sponsors.
Unlike Insilico, in the prospectus, XtalPi describes itself as an innovative R&D platform company based on quantum physics, empowered by artificial intelligence, and driven by robotics. By combining first-principles calculations based on quantum physics, advanced artificial intelligence, high-performance cloud computing, and scalable and standardized robotic automation, XtalPi provides drug and materials science R&D solutions and services to global corporate groups and innovative companies in industries such as pharmaceuticals and materials science (including agrotechnology, energy, new chemicals, and cosmetics).
Financially, the prospectus shows that XtalPi's operating losses were RMB 126 million, RMB 299 million, and RMB 525 million in 2021, 2020, and 2022, respectively. In the first half of 2023, XtalPi's operating loss was RMB 434 million. In 2021, 2020, 2022, and the first half of 2023, XtalPi's adjusted net loss was RMB 122 million, RMB 270 million, RMB 437 million, and RMB 357 million, respectively.
Core business is drug discovery for pharmaceutical companies
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 R&D services and automated chemical synthesis services).
The prospectus shows that XtalPi's revenue increased from RMB 35.636 million in 2020 to RMB 62.799 million in 2021, and further grew to RMB 133 million in 2022, with a CAGR (Compound Annual Growth Rate) of 93.4%. Additionally, by the first half of 2023, XtalPi's revenue reached RMB 80 million, representing an 86.3% year-on-year increase from RMB 42.9 million in the same period last year.
The Interface News once explored in depth: When AI meets pharmaceuticals, will it become a disruptor or just play a supporting role?The analysis highlights the business differences between these two AI pharmaceutical companies: Insilico Medicine clearly exhibits characteristics of a biotech company. It has multiple R&D pipelines, aiming to develop First-in-class or Best-in-class drugs and drive these pipelines to market or be acquired by large pharmaceutical enterprises.
XtalPi is more aligned with the AI+CRO (Contract Research Organization) model, offering its AI-driven R&D technology and services as products to pharmaceutical and biotechnology companies. It collaborates with partners to complete specific stages of R&D or covers the entire process from target discovery to preclinical validation, then hands over the clinical candidates to partners for further preparation of new drug applications and clinical development and research.
XtalPi stated in its prospectus that it has achieved the above business due to the following capabilities:
- Advanced artificial intelligence capabilities based on quantum physics calculations;
- First-principles calculations based on quantum physics supported by high-performance computing;
- Flexible and extensive artificial intelligence capabilities supported by various multimodal, customer-oriented, scenario-based algorithms and models;
- A cluster of intelligent robot scientists with artificial intelligence brains drives the automation, scalability, standardization, and high throughput of wet labs;
- A complementary feedback loop between dry labs and wet labs; the accumulation of meaningful and substantial data assets generated through the collaboration of dry labs and wet labs.
Specifically, the core business of XtalPi is its drug discovery solutions (providing solutions across different modules throughout the entire process of drug discovery and research), which is also the fastest-growing segment. Among its highlighted advantages, XtalPi emphasizes the ability to simultaneously utilize both wet lab and dry lab capabilities, promoting reductions in R&D cycle times and costs.
According to the prospectus, XtalPi's drug discovery solutions focus on identifying and developing molecules that exhibit pharmacological activity against specific disease-related targets. XtalPi's drug discovery solutions span the entire process of drug discovery and research, from target validation, hit identification, lead generation, lead optimization to preclinical candidate nomination, covering various modalities including small molecules, antibodies, peptides, ADCs (antibody-drug conjugates), and PROTACs (proteolysis-targeting chimeras).
In addition, XtalPi is also collaborating with several drug developers to jointly research various therapeutic targets. If the collaboration projects reach the milestones or events specified in the relevant contracts, such as successful commercialization in a specific region, royalties and milestone payments will be obtained from the relevant drug discovery collaborations.
The prospectus shows that in 2020, 2021, and 2022, the revenue from XtalPi's drug discovery solutions business was 12.666 million, 39.346 million, and 87.666 million yuan, respectively, accounting for 35.5%, 62.7%, and 65.7% of total revenue.
Pfizer, Johnson & Johnson, CSPC, Daewoong Pharmaceutical, and Merck KGaA are all clients of XtalPi's drug discovery solutions. XtalPi also relies on major clients.
According to the prospectus, in 2022, 2021, and 2022, XtalPi had 43, 75, and 120 clients respectively. As of June 30, 2023, XtalPi had a total of 107 clients. Among them, the revenue from the top five clients in 2022, 2021, 2022, and the first half of 2023 was 29.9 million yuan, 38.8 million yuan, 66.1 million yuan, and 33.1 million yuan respectively. The customer retention rates for 2022, 2021, 2022, and the first half of 2023 were 53.8%, 67.5%, 51.4%, and 51.4% respectively.
Future Bets on Intelligent Automation Solutions
XtalPi's intelligent automation solutions mainly include solid-state R&D services and automated chemical synthesis services.
According to the prospectus, in 2020, 2021, and 2022, the revenue from XtalPi's intelligent automation solutions business was 22.97 million yuan, 23.453 million yuan, and 45.687 million yuan, respectively, accounting for 64.5%, 37.3%, and 34.3% of total revenue.
Among them, in 2020, 2021, 2022, and the first half of 2023, the solid-state R&D revenue from XtalPi's intelligent automation solutions business was 22.678 million yuan, 23.296 million yuan, 27.756 million yuan, and 23.629 million yuan, respectively; the automated chemical synthesis revenue was 0 yuan, 55,000 yuan, 17.931 million yuan, and 20.077 million yuan, respectively.
XtalPi's Solid-State R&D Business in Intelligent Automation Solutions Focuses on Polymorph ResearchSolid-state research is required in at least three stages of drug development: preclinical, post-phase I clinical trials, and post-phase II clinical trials. The aim is to identify thermodynamically stable crystal forms for in vitro studies, pilot-scale studies, and patent protection. In reality, many compounds exhibit more than one unique crystal form—a phenomenon known as polymorphism. Polymorphism is particularly important for drug molecules because specific crystal forms can affect the bioavailability and efficacy of a drug. Comprehensive solid-state research is essential for obtaining primary crystal form patent protection for a specific drug molecule. XtalPi's service in this area helps clients select specific, stable crystal forms.
The prospectus shows that, as of the cutoff date, XtalPi achieved a 100% success rate in crystal structure prediction projects for all small molecules. However, the accuracy of XtalPi's crystal predictions for antibodies, peptides, ADCs, and PROTACs was not disclosed.
Chemical synthesis is the process of converting chemical reactants or starting materials into compounds. This process is both time-consuming and expensive in traditional practice. XtalPi provides automated chemical synthesis as part of its intelligent automation solutions, utilizing the automated system XtalDynamics to generate vast amounts of data 24 hours a day, reducing errors caused by manual intervention. In short, it replaces previously manual collaborative work with automated equipment.
Overall, the intelligent automation solution is actually XtalPi's bet on the future, aiming to expand its business into fields such as materials and automation. XtalPi describes this move as providing standard or customized automation solutions for other high-value sectors in the future, such as materials science, biomaterials, agricultural technology, cosmetics, and more.
To truly realize this concept, sufficient R&D funding is required. According to the PharmaCube InvestGo investment and financing database, XtalPi has previously completed six rounds of financing, with a total financing amount exceeding 5 billion yuan. Its investors include Sequoia, Mirae Asset, Google, Tencent, and China Life.
As of June 30, 2023, XtalPi had cash and cash equivalents, the current portion of time deposits, restricted cash, and the current portion of financial assets measured at fair value through profit or loss totaling RMB 3.211 billion. Additionally, as of September 30, 2023, XtalPi also had RMB 290 million in bank financing.
In terms of R&D expenses, XtalPi continues to increase its investment. According to the prospectus, XtalPi's R&D expenditure increased by 68.8% from 212 million yuan in 2021 to 359 million yuan in 2022. Among this, employee welfare expenses increased by 29.7 million yuan due to an increase in staff; sample testing fees increased by 4.6 million yuan due to increased procurement of laboratory consumables; and cloud service system construction costs increased by 3.1 million yuan.
In addition, the expenses of XtalPi's management and administrative staff surged before the listing. According to the prospectus, XtalPi's general and administrative expenses increased from RMB 47.486 million in 2022 to RMB 204 million in 2022. Among them, the proportion of management and administrative staff was the highest, increasing from RMB 31.52 million in 2022 to RMB 132 million in 2022.