Dizal Pharmaceutical Files for Hong Kong IPO: Core Assets Acquired from AstraZeneca, Racked Up RMB 1.5B Loss in 3.5 Years

(The Science and Technology Innovation Board Daily) (Shanghai, reporter Zhu Jieyu) News, on December 1st, Dizal Pharmaceutical officially started its subscription, with the subscription code 787192. The company plans to issue 40 million shares at an issue price of 52.58 yuan per share, raising a total of 2.103 billion yuan, which is 1.15 times more than originally planned.

Dizal Pharmaceutical was jointly founded by SDIC Innovation and AstraZeneca, with its core team mostly coming from AstraZeneca's China Innovation Center. From its establishment in November 2017 to the application for listing on the STAR Market in 2021, it took only four years.

Currently, Dizal Pharmaceutical has no controlling shareholder or actual controller. As of the date of the signing of the prospectus, Advanced Manufacturing under SDIC Innovation and AZAB under AstraZeneca both hold 30.2564% of the voting rights of the company. The proportion of voting rights held by both parties is the same, and there is no affiliation or acting-in-concert relationship between them.

During the third round of inquiries, the Shanghai Stock Exchange focused on whether Dizal is significantly dependent on or transferring benefits to AstraZeneca.

　　Focus on the Field of Major Disease Treatment Such as Cancer, with a Close Relationship with AstraZeneca

Dizal's R&D products are all small molecule drugs, currently focusing on malignant tumors and autoimmune diseases, with four products having entered the clinical stage. Among them, one product is in a pivotal Phase III or Phase II clinical stage, one product is in a non-pivotal Phase II clinical stage, and two products are in Phase I clinical stage.

In Dizal's product pipeline, the novel specific JAK1 tyrosine kinase inhibitor DZD4205 is the company's most advanced candidate drug, currently in the international multicenter Phase II single-arm pivotal trial clinical stage. The first indication for which its clinical trial is being advanced is peripheral T-cell lymphoma (PTCL). DZD4205 is also the world's first JAK1-specific inhibitor to enter clinical trials for PTCL.

In addition, clinical trials for DZD4205 in indications such as myeloproliferative neoplasms (MPN), multiple myeloma (MM), inflammatory bowel disease (IBD), dry eye syndrome (DES), and atopic dermatitis (AD) are expected to commence or submit an IND in 2022.

Notably, DZD4205 was transferred to Dizal Pharmaceutical from its shareholder AstraZeneca. It is the only product in the company’s current pipeline that has been approved for Phase II clinical trials. According to the fifth set of listing standards for the STAR Market, which states that "pharmaceutical industry companies must have at least one core product approved for Phase II clinical trials," it can be said that DZD4205 is the "fallback" product that determines Dizal Pharmaceutical's listing on the STAR Market.

Dizal Pharmaceutical's Chairman and General Manager, Xiaolin Zhang, was the former head of AstraZeneca's Innovation R&D Center for Asia and Emerging Markets. According to the information disclosed in the prospectus, as of December 31, 2020, Dizal Pharmaceutical’s management team and R&D staff included a total of 55 individuals who had previously worked at AstraZeneca.

In the third round of inquiries, the Shanghai Stock Exchange paid considerable attention to the relationship between Dizal Pharmaceutical and AstraZeneca. Dizal Pharmaceutical responded that the company has been independently operated and developed since its establishment, with a stable and clear equity structure. Advanced Manufacturing and AstraZeneca are listed as the company's largest shareholders, both having strict internal control and management systems. The rights and responsibilities of both parties are equal and mutually balanced. The company’s determination of having no controlling shareholder or actual controller does not intentionally circumvent the regulatory requirements of the securities market.

Although some personnel had previously worked at AstraZeneca China, they have completely severed their labor relations, and the company maintains independence in terms of staffing.

Although the compound patents for the company's three products, DZD4205, DZD2954, and DZD0095, were purchased from AZAB, the determination of product direction and subsequent research and development were entirely self-developed by the company. Based on its proprietary core technology platform, the company conducted extensive translational medicine research, mechanism of action studies, and preclinical efficacy, pharmaceutical, and toxicology research after acquiring the compounds in order to advance the compounds into the clinical trial stage. The valuation of the acquired compound patents was fair, and the company has obtained the relevant intellectual property rights. There are no disputes or potential disputes regarding the intellectual property involved in each of the company’s R&D pipelines.

　Loss of approximately 1.5 billion yuan in three and a half years

Dizal Pharmaceutical stated in the prospectus that the company’s product pipeline is at a relatively early stage of development. The company’s most advanced product pipelines, DZD4205 and DZD9008, are both currently undergoing international multi-center Phase II single-arm pivotal clinical trials, while other product pipelines are either in Phase I clinical trials or pre-clinical stages, indicating an overall relatively early stage of progress.

From 2018 to 2020 and the first six months of 2021, the net losses attributable to ordinary shareholders of Dizal Pharmaceutical were RMB 174 million, RMB 446 million, RMB 587 million, and RMB 299 million, respectively. This means that the company has accumulated net losses of RMB 1.5 billion in three and a half years. For a period of time in the future, the company expects to have cumulative uncompensated losses and will continue to incur losses. During the reporting period, the company's R&D expenses were RMB 210 million, RMB 421 million, RMB 439 million, and RMB 258 million, respectively.

As R&D investment increased, Dizal Pharmaceutical is expected to have remained in a loss state for the 2021 fiscal year: projected revenue for 2021 is between 8 million and 13 million yuan, a decrease compared to last year, primarily due to the company reducing technical support services provided to AZAB and its affiliates; net loss attributable to shareholders of the parent company is expected to be between 610 million and 680 million yuan, with net loss after deducting non-recurring gains and losses attributable to shareholders of the parent company estimated at 612 million to 682 million yuan, an increase compared to the same period last year, mainly due to the company intensifying its R&D investment in clinical pipelines.

According to Dizal Pharmaceutical's offering price of 52.58 yuan per share, the company's market value at the time of listing was 21.032 billion yuan, corresponding to a price-to-research ratio of 47.85 times after dilution in 2020, which is lower than the average price-to-research ratio of comparable companies in the same industry.