Genor BioPharma Re-submits HKEX Listing Application for Landmark Reverse Takeover by Edding Pharma, the First Under Chapter 18A

On April 15, according to an announcement by Genor Biopharma, the company has submitted a new listing application to the Hong Kong Stock Exchange. Yiteng Pharmaceutical will acquire Genor Biopharma through a reverse takeover, with Morgan Stanley and SPDB International serving as joint sponsors for this new listing application.

It is reported that Genor Biopharma listed on the Hong Kong Stock Exchange in 2020, with its market capitalization exceeding RMB 10 billion on the first day of trading. The company’s recent re-application for listing on the Hong Kong Stock Exchange stems from its reverse takeover of Yiteng Pharmaceutical last October, marking the first case of a reverse takeover by an innovative drug company under Chapter 18A of the Hong Kong Listing Rules.

As this reverse takeover occurred after the Hong Kong Stock Exchange’s 2019 regulatory reforms on reverse takeovers, Genor Biopharma is required to undergo review under the standards applicable to new listing applicants, in accordance with HKEX rules. Consequently, Genor Biopharma must submit a new listing application to meet compliance requirements. The materials submitted by Genor Biopharma focus primarily on the financial integration of the post-merger entity, its synergy strategies, and proof of regulatory compliance.

This transaction not only resolves the challenges of product R&D and commercialization for both parties, but may also become a landmark case of resource integration under Chapter 18A of the Hong Kong Stock Exchange.

In October last year, Genor Biopharma issued an announcement stating that it had entered into a merger agreement with Yiteng Pharmaceutical. Genor Biopharma will acquire Yiteng Pharmaceutical through the merger and change the name of the merged entity to “Yiteng Genor Pharmaceutical Group Co., Ltd.” The announcement indicated that the transaction would be conducted via a share swap, constituting a reverse takeover of Genor Biopharma. In the newly merged company, former shareholders of Yiteng Pharmaceutical will hold 77.43% of the shares, while former shareholders of Genor Biopharma will hold 22.57%, with the actual controller of Yiteng Pharmaceutical becoming the controlling shareholder of the merged entity. Meanwhile, Genor Biopharma will allot and issue a certain number of consideration shares to the shareholders of Yiteng Pharmaceutical as acquisition consideration.

According to the announcement, Genor Biopharma and Eddingpharm Group have entered into an outsourcing management agreement for CDK4/6 inhibitors (CDK4/6i). The directors anticipate that the commercialization of CDK4/6i is imminent, and that Genor Biopharma has reached a critical stage of development requiring robust commercial capabilities to seize all potential market opportunities. The Board believes that Eddingpharm meets the aforementioned criteria. “The proposed merger represents a key step for the Company towards becoming a mature and fully integrated biopharmaceutical company. It is expected to generate complementary and synergistic effects for both the Group and the Target Group, laying a solid foundation for the sustainable development of the enlarged group post-completion of the merger.”

Notably, this marks the first instance of a reverse takeover by an innovative pharmaceutical company since the Hong Kong Stock Exchange introduced Chapter 18A. The shareholding structure of the merged entity is as follows: former shareholders of Eddingpharm hold 77.43% of the shares, while former shareholders of Genor Biopharma hold the remaining 22.57%. It is worth noting that the actual controller of Eddingpharm will assume the role of controlling shareholder in the post-merger company.

This merger stands as a landmark transaction that has captured significant attention within the industry. Genor Biopharma’s R&D capabilities and promising product pipeline are highly competitive among companies listed under Chapter 18A of the Hong Kong Stock Exchange, while Yiteng Pharma boasts strong commercialization capabilities and stable cash flow. The successful execution of this merger marks a deep integration and efficient consolidation of both parties’ complementary strengths, paving a novel and promising development path for innovative pharmaceutical enterprises in China.

Since the second half of 2024, policy easing has permitted backdoor listings and cross-industry mergers and acquisitions (M&A), igniting market enthusiasm for M&A activities. Industry experts believe that this merger may mark the beginning of backdoor listings for companies under Chapter 18A of the Hong Kong Stock Exchange Listing Rules. Currently, at least 10 companies listed under Chapter 18A have a market capitalization of less than HK$1 billion, making them potential targets for backdoor IPOs. Given the ongoing financing challenges in the biotechnology sector, similar merger cases are likely to occur in the future.

Genor Biopharma, established in 2007, is one of the early domestic biopharmaceutical companies in China focused on the research, development, and commercialization of oncology and autoimmune disease therapeutics. By building a diverse and innovative portfolio of drug candidates and pipelines, Genor Biopharma provides novel therapies to patients. The company was founded during a boom period in the biopharmaceutical industry. Leveraging its innovative potential, it completed six rounds of financing in the five years preceding its IPO, with Hillhouse Capital as a key supporter.

In 2020, Genor Biopharma successfully completed its initial public offering (IPO) on the Hong Kong Stock Exchange. Attracted by Hillhouse Capital’s endorsement, the offering was oversubscribed, with the share price surging more than 30% on the first day of trading and the market capitalization exceeding HK$14 billion. Although the company went public while still incurring losses, investors valued its R&D capabilities. At that time, the company had established a product pipeline comprising 15 targeted drug candidates, was advancing 18 clinical trials across Asia, and had submitted multiple new drug marketing applications. However, post-listing R&D progress slowed, leading to a decline in its stock price. The 2023 financial report showed zero total revenue and a loss of RMB 674 million; in the first half of 2024, revenue amounted to only RMB 14 million, with a loss of RMB 126 million, while cash and bank balances dropped to RMB 1.027 billion.

Although Genor Biopharma’s R&D capabilities are formidable, with high-potential products such as the globally leading CD3/CD20 bispecific antibody candidate GB261, the CDK4/6 inhibitor GB491, and the trispecific antibody GB268, the company lacks downstream commercialization capabilities. This merger is well-justified for Genor Biopharma.

Turning to Eddingpharm, it is a pharmaceutical company with outstanding commercialization capabilities. Once one of the leading Contract Sales Organizations (CSOs) in China, Eddingpharm later transformed its business model to engage in innovative drug research and development. Its revenue is supported by core products such as Vancomycin Hydrochloride for Injection (Vancocin), Cefaclor (Ceclor), and inhaled corticosteroids (Yiruiping).

In terms of financial performance, Yiteng Medicine’s revenues for the years 2022 to 2024 were RMB 2.074 billion, RMB 2.304 billion, and RMB 2.546 billion, respectively. The steady growth in its sales revenue was primarily attributable to the strong performance and potential of its product portfolio. Driven by robust volume growth of commercialized products, Yiteng Medicine achieved a steady increase in overall gross profit while maintaining relatively consistent selling prices. Its gross profit increased from RMB 1.368 billion in 2022 to RMB 1.716 billion in 2024; the overall gross margin remained robust, rising from 66.0% in 2022 to 67.4% in 2024.

Yiteng Pharmaceutical adopts a “cash flow first, R&D second” growth model, ensuring greater sustainability. The company not only boasts a diversified portfolio of innovative patented drugs and originator products but has also established a sales network covering more than 17,000 hospitals across China, along with a global supply chain management system. Its founder, Ni Xin, came from a pharmaceutical sales background and established Yiteng Pharmaceutical in 2001 using a Contract Sales Organization (CSO) model. Initially focused on distributing originator products from European and American pharmaceutical companies, the company gradually transitioned to a strategy that balances the acquisition of mature products with innovative R&D, specializing in anti-infective, cardiovascular, and respiratory therapeutic areas.

However, the company’s path to an initial public offering (IPO) has not been smooth. According to public records, Yiteng Pharma first filed its application with the Hong Kong Stock Exchange on September 23, 2020. Two and a half years later, it resubmitted its filing on June 23, 2023, and received the filing notice from the China Securities Regulatory Commission on December 20, 2023. There were no further updates regarding approval by the Hong Kong Stock Exchange’s Listing Committee until October 7, 2024, when Genor Biopharma announced a reverse merger.

It can be said that the merger between Genor Biopharma and Yiteng Pharmaceutical is highly complementary.

For Genor Biopharma, it has established a rich and innovative pipeline of candidate drugs in the fields of oncology and autoimmune diseases. Its CDK4/6 inhibitor product is about to be commercialized, but it faces insufficient cash flow. Yiteng Pharmaceutical possesses an industry-leading sales and marketing network, advanced manufacturing platforms, and a global supply chain management system, which are precisely what Genor Biopharma needs.

For Yiteng Pharma, which had previously failed to achieve an IPO despite multiple filings with the Hong Kong Stock Exchange, listing via a reverse merger with Genor Biopharma will accelerate its entry into the capital markets, open up broader financing channels, and create greater space and opportunities for its future development.

Following the merger, Genor Biopharma’s R&D capabilities and market foundation in the biopharmaceutical sector will create strong synergies and complementarity with Yiteng Pharmaceutical’s well-established commercialization platform. Through this consolidation, both parties can achieve resource sharing and leverage their respective strengths, thereby further enhancing their market competitiveness and laying a solid foundation for the sustainable development of the combined entity.

References:

A Series B Company Goes Public via Direct Listing – ChinaVenture