Sirnaomics Subsidiary RNAimmune and Hualan Biological Enter Strategic BD Deal on RSV mRNA Vaccine RV-1770, Providing Lifeline for Both Parties

Recently, Sirnaomics’ subsidiary RNAimmune (Damiang Bio) announced a strategic partnership with Hualan Biological Vaccine Co., Ltd. (Hualan Biological),Aims to promote the clinical development and commercialization of RV-1770, an mRNA vaccine against respiratory syncytial virus (RSV), in China.Under this collaboration, Damian Bio will receive upfront payments, milestone payments, and sales royalties from Hualan Biological Engineering, Inc., while Hualan Biological Engineering, Inc. will obtain exclusive rights to the clinical development, industrialization, and commercial expansion of RV-1770 in China.

On one side, Hualan Biological Engineering’s chairman An Kang stated in an interview with Yingshi Finance that “2023 was a year when Hualan Biological’s expenditures exceeded its revenues.” On the other side, Sirnaomics, known as China’s first small-nucleic-acid stock, has seen successive forced liquidations of shareholder positions. This business development (BD) deal may well be a long-overdue “timely rain” for both parties.

Following the announcement of the business development deal, Sirnaomics reversed its sluggish performance, with its stock price showing a significant climb and reaching a daily high increase of over 10% on April 26. In contrast, Hualan Biological Engineering, Inc. experienced a slight decline of 1.04% on the same day, before gradually recovering to achieve a peak gain of 1.25% to date.

The core asset of this BD transaction, RV-1770, is an mRNA vaccine featuring a proprietary lipid nanoparticle (LNP) formulation, specifically designed for the prevention of RSV infection in adults. Currently, two RSV vaccines developed by GSK and Pfizer have received global marketing approval; both are recombinant protein vaccines, and no RSV mRNA vaccine has yet been approved for market entry.

RV-1770 is an innovative RSV mRNA vaccine featuring a unique AI-enhanced backbone design and incorporating sequences from recently isolated clinical RSV strains. In preclinical studies using the cotton rat model, the vaccine demonstrated immune responses and neutralizing activity against both RSV subtypes A and B.In December 2023, RV-1770 received FDA Investigational New Drug (IND) approval, marking it as Sirnaomics’ second innovative mRNA vaccine to enter the clinical stage.

Sirnaomics’ first mRNA vaccine to enter clinical development is the COVID-19 vaccine RV-1730, which received FDA IND approval in April 2023 and is currently initiating a Phase I clinical trial as a candidate booster vaccine against severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2).

According to a previous announcement by Sirnaomics, the Phase I clinical study of RV-1770 will administer the vaccine via intramuscular injection at three different doses (50 μg, 100 μg, or 200 μg) to healthy adult subjects aged 18–49 years and elderly subjects aged 60–79 years. The clinical study plan expects to enroll a total of 162 subjects, divided equally into a young adult group and an elderly adult group, with 81 subjects in each. All subjects will undergo post-vaccination monitoring for 12 months to assess the safety and immunogenicity of RV-1770.

Dr. Lu Yang, Founder, Chairman, and CEO of Sirnaomics, stated in an interview, “When capital markets are overheated, pharmaceutical companies enjoy relatively abundant funding and can fully advance their projects. However, as capital becomes scarcer, securing the necessary funds to continuously develop their pipelines becomes a challenge. In fact, business development (BD) activities—such as out-licensing, co-development, and technology transfers—can generate cash flow while enhancing technological capabilities and expanding market reach. Meanwhile, these BD activities also serve to validate and demonstrate a company’s value within the current market environment. Of course, BD inherently involves the concept of asset divestiture, which means that innovative biopharmaceutical companies may have to relinquish their most valuable assets in order to survive.” Nevertheless, based on Sirnaomics’ annual report, BD has likely become an inevitable path for the company’s “self-rescue.”

Sirnaomics, hailed as China’s “leading small nucleic acid stock,” officially listed on the Hong Kong Stock Exchange in December 2021 at an issue price of HK$65.90 per share, raising approximately HK$561 million in its IPO. In early 2022, Sirnaomics’ share price briefly climbed to HK$101 per share before entering a sustained decline.As of the market close on April 29, Sirnaomics closed at HK$6.55 per share, representing a decline of more than 90% from its historical peak, with its current total market capitalization standing at only HK$574 million.

Currently, Sirnaomics’ R&D scope has expanded from its initial focus on oncology and fibrosis therapies to include anticoagulation therapies, cardiovascular and metabolic diseases, complement-mediated diseases, viral infections, and medical aesthetics. According to its 2023 performance announcement, Sirnaomics has more than 10 projects in development, with STP705, STP707, and STP122G among its key pipeline candidates.

In March this year, two major shareholders of Sirnaomics were subject to forced liquidation. In its announcement, Sirnaomics emphasized that there had been no material adverse changes in the Group’s business operations or its research and development activities, and that the management team remained confident in the company’s long-term growth prospects. It is worth noting, however, thatSirnaomics remains an unprofitable biotechnology company, with all its pipeline candidates currently in the clinical trial stage.

STP705 is Sirnaomics’ most core pipeline asset, covering two indications: squamous cell carcinoma in situ and basal cell carcinoma. According to the announcement, Sirnaomics will further advance the development of STP705 for squamous cell carcinoma in situ in 2024, and has carefully designed a Phase II/III clinical trial based on FDA guidance. The company expects to provide updates on its plans to the U.S. FDA in the second quarter of 2024. Regarding the basal cell carcinoma indication, Sirnaomics stated, “In accordance with standard procedures, we plan to hold an End-of-Phase II meeting with the U.S. FDA to obtain their guidance on the late-stage development of STP705 for the treatment of basal cell carcinoma.”

Based on Sirnaomics’ disclosed 2023 financial performance, the company currently has no commercialized products. Its sales revenue was zero in 2021–2022 and the first half of 2023, with net losses amounting to $213 million, $88.299 million, and $37.959 million, respectively. In 2023, Sirnaomics recorded other income of $1.414 million, a year-on-year decrease of 33.11%; the annual loss was $84.99 million, narrowing by 12.7% year on year; and R&D expenditures totaled approximately $54.382 million.

According to Wind data, Sirnaomics had cash and cash equivalents of $105 million at the end of 2022. As of June 30, 2023, its current assets decreased to $74.2 million, including $57.3 million in cash and cash equivalents. Within just six months, Sirnaomics “burned” through more than $47 million in cash.Wind’s latest data shows that Sirnaomics’ cash and cash equivalents in 2023 amounted to $24 million, ranking among the lowest of more than 60 Hong Kong-listed biopharmaceutical companies under Chapter 18A.

At the current rate of cash burn, Sirnaomics’ new drug R&D may struggle to last until June this year without follow-on financing. Under multiple pressures, including tight cash flow and tightening regulations, Sirnaomics is facing an urgent crisis. Therefore, business development (BD) may have become one of the viable options to sustain Sirnaomics’ operations.

Although the specific financial terms of this business development (BD) deal with Hualan Biological Engineering, Inc. were not disclosed, it has already become a “lifeline” for Sirnaomics. For Hualan Biological, the timing of this transaction could not have been more opportune.

According to the financial report, Hualan Biological Engineering, Inc. achieved an annual revenue of RMB 5.342 billion in 2023, a year-on-year increase of 18.26%. The net profit attributable to shareholders of the listed company reached RMB 1.482 billion, up 37.66% year on year, while the net profit attributable to shareholders after deducting non-recurring gains and losses amounted to RMB 1.267 billion, representing a 41.78% year-on-year increase. The gross profit margin and net profit margin stood at 69.59% and 32.98%, respectively, both showing year-on-year growth.

However, at Hualan Biological Engineering, Inc.’s 2023 Annual General Meeting of Shareholders held recently, An Kang, the company’s chairman who is over seventy years old, expressed that he was “both satisfied and dissatisfied” with the company’s operational performance over the past year.

Hualan Biological Engineering, Inc., established in 1992, primarily engages in three core business segments: the research, development, and production of blood products, vaccine products, innovative drugs, and biosimilars. Its vaccine business, launched in 2005, has achieved significant milestones, including being among the first globally to market an H1N1 influenza vaccine, becoming the fifth company worldwide and the first in China to obtain WHO prequalification for influenza vaccines, and establishing itself as China’s largest production base for split-virion influenza vaccines.

In 2022, Hualan Biological Engineering, Inc. spun off Hualan Vaccine for a separate listing by directly holding a 67.5% equity stake in the company. According to public data, a total of 94 batches of influenza vaccines were approved for release in 2023, including 73 batches of quadrivalent influenza vaccine (adult formulation), 15 batches of quadrivalent influenza vaccine (pediatric formulation), and 6 batches of trivalent influenza vaccine. Financial reports show that Hualan Vaccine generated revenue of RMB 2.41 billion in 2023, a year-on-year increase of 32%, and achieved a net profit of RMB 859 million, a year-on-year increase of over 65%. According to the financial report of Hualan Biological Engineering, Inc.,During the reporting period, vaccine products contributed approximately RMB 579 million in net profit to Hualan Biological Engineering, Inc., accounting for nearly 40% of the company's net profit in 2023.

Currently, Hualan Vaccine’s marketed products include three influenza vaccines, two meningitis vaccines, and one each of hepatitis B vaccine, rabies vaccine, and tetanus vaccine. According to financial reports, from 2021 to 2023, influenza vaccines accounted for over 99% of the company’s total revenue, serving as the absolute primary revenue driver.

Influenza vaccination is highly seasonal, and the scale and trends of annual epidemics are difficult to predict accurately, leading to variations in quarterly performance. According to the first-quarter report recently released by Hualan Vaccine, operating revenue for the first quarter was RMB 34.2227 million, a year-on-year decrease of 76.36%; operating costs were RMB 3.4052 million, a year-on-year increase of 1,163.02%; net profit attributable to shareholders of the parent company was RMB 38.5895 million, a year-on-year decrease of 58.93%; and net profit after deducting non-recurring gains and losses was RMB 14.1570 million, a year-on-year decrease of 79.19%.

Notably, due to increasing competition in the influenza vaccine sector, net profit margins for influenza vaccines have shown a year-on-year decline. According to Hualan Vaccine’s financial reports, its net profit margin attributable to shareholders after deducting non-recurring gains and losses was 26%, 34%, 37%, 32%, and 25% from 2018 to 2022, respectively. Therefore, developing a new vaccine product with billion-dollar revenue potential has become one of Hualan Vaccine’s current strategic priorities.

The RSV mRNA vaccine involved in the business development (BD) transaction with Sirnaomics holds significant explosive potential, adding new weight to the competitive portfolio of Hualan Biological Engineering’s vaccine products. In 2023, the century-old challenge of developing an RSV vaccine, which had plagued the industry for over 60 years, was officially overcome, with two marketed RSV vaccines achieving nearly $2.5 billion in sales.

References:

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