Chongqing Billionaire's Innovative Biopharma, Genrix Bio, Debuts on STAR Market with $2B Valuation

Following the implementation of the comprehensive registration-based IPO system, the STAR Market has welcomed a highly controversial listing—GENRIX BIO went public today with an issue price of RMB 37.88 per share.

GENRIX BIO adopts the fifth set of listing criteria for the STAR Market: an estimated market capitalization of no less than RMB 4 billion, with phased achievements attained; pharmaceutical companies are required to have at least one core product approved to enter Phase II clinical trials, with no requirements imposed on profitability, revenue, or net assets.

GENRIX BIO has thus become the third company from the Chongqing region to be listed on the STAR Market. When discussing GENRIX BIO, it is impossible not to mention its founder and actual controller, Jiang Rensheng, who also serves as the head of Zhifei Biological, an A-share listed company.

Zhifei Biological’s stock price climbed from 2017 to 2020, reaching a peak market capitalization of RMB 370 billion. The company’s performance soared thanks to its exclusive distribution rights for Merck’s 9-valent HPV vaccine, propelling Jiang Rensheng to become the richest person in Chongqing.

Jiang Rensheng is a shrewd businessman who currently controls nearly 50% of the equity in Zhifei Biological and over 70% of the equity in GENRIX BIO. Jiang joined Zhifei Biological in 2002 and led the company to its listing on the ChiNext board in 2010, accomplishing this in just eight years. Similarly, it took only eight years from the establishment of GENRIX BIO in 2015 to its current listing.

However, for a company backed by Chongqing Zhifei Biological Products Co., Ltd., the rate of subscription abandonment in its IPO reached 20%. The primary reason is the stark contrast between its substantial losses and minimal revenue, despite a relatively high offering price: from 2020 to 2022, it accumulated losses of RMB 1.271 billion, while its operating revenues for these three years were only RMB 1.0877 million, RMB 39.1902 million, and RMB 475,200, respectively. In the first quarter of this year, revenue stood at merely RMB 100,000, derived from technical services, sublicensing, and raw material sales.

The STAR Market itself carries venture capital characteristics and does not guarantee absolute success, let alone for innovative drug companies facing odds of nine deaths to one life. Can the A-share market, accustomed to revenue-backed stability, accept innovative firms like GENRIX BIO that require heavy upfront investment? Only time will tell.

Zhifei Biologics was co-founded by Jiang Rensheng and Liu Junhui. The latter, with a technical background, aspired to realize his ambitions through self-developed products. Divergent philosophies led to their parting of ways; subsequently, Liu Junhui established Walvax Biotechnology, while Jiang Rensheng became known as the “Vaccine King” through distribution agreements.

Zhifei Biological’s performance truly surged following the launch of Merck’s quadrivalent HPV vaccine, further propelled by the introduction of the 9-valent HPV vaccine and the overall ramp-up in HPV vaccine volumes. As Merck’s exclusive distributor for HPV vaccines in China, Zhifei Biological saw its stock price rise consecutively, and later achieved a second significant leap driven by COVID-19 vaccines, solidifying its position as an undisputed leader in the vaccine industry.

However, as agency distribution remains its primary revenue source, Chongqing Zhifei Biological Products Co., Ltd. has long faced criticism regarding its growth prospects. Consequently, GENRIX BIO, nurtured by Jiang Rensheng, has assumed the critical role of innovative R&D within his medical portfolio. The company has since expanded deeply into innovative drug sectors including autoimmune diseases, infectious diseases, and oncology, with a total of 12 candidates in its development pipeline.

The company has invested a total of RMB 980 million in research and development over the past three years, with technical R&D personnel accounting for 87.76% of its workforce. Its product portfolio covers autoimmune diseases, infectious diseases, and oncology. One product (for one indication) has submitted a New Drug Application (NDA), and seven products (covering 11 indications) have entered clinical trials.

GENRIX BIO maintains close ties with Zhifei Biological, a vaccine company with a market capitalization of hundreds of billions. Its key product, GR1801, is an independently developed recombinant fully human bispecific antibody against the rabies virus (RABV). As the world’s first bispecific antibody for passive immunization against rabies, it is currently in Phase III clinical trials. Its core autoimmune product, GR1501, is the first domestically produced IL-17A monoclonal antibody to file for marketing approval in China, targeting moderate-to-severe plaque psoriasis, a condition with a substantial market potential.

Since its establishment, GENRIX BIO has been primarily in an investment-intensive phase. From 2019 to 2022, the company’s R&D expenses amounted to RMB 125 million, RMB 228 million, RMB 295 million, and RMB 454 million, respectively. The funding for these R&D activities mainly came from shareholder contributions and equity financing, which together brought a total capital injection of RMB 937 million into the company. Additionally, the company secured debt financing; by the end of 2022, it had obtained loans totaling RMB 747 million from Chongqing Rural Commercial Bank. This also demonstrates the influence of Jiang Rensheng, the actual controller, in the Chongqing region.

The second-largest shareholder of GENRIX BIO is Shan Jikuan, the Chairman, who held a direct 5.29% stake prior to the IPO. Unlike Jiang Rensheng, who ventured into business in his early years and gained experience through hands-on practice, Shan Jikuan comes from a professional academic background. He previously served as a resident physician at the 321st Hospital of the Chinese People's Liberation Army. He subsequently held positions including Manager of the Medical Department at Fudan-Zhangjiang Biomedical, Manager of the Medical Registration Department and Medical Director at Zerun Biology, Director and Deputy General Manager at Zhonghe Pharmaceutical, and Director and Deputy General Manager at Hezhong Pharmaceutical. He was also a founding shareholder of Junshi Biosciences. The General Manager, Chang Zhiyuan, also hails from Zerun Biology, where he successively served as Department Head, Manager, and Director.

According to a research report released by Industrial Securities, the overall size of China's autoimmune disease market is projected to grow from $2.4 billion in 2019 to $24.1 billion in 2030, with a growth rate significantly higher than the global average. GENRIX BIO has clearly targeted this broad sector. Its core product, GR1501, is Xeligekimab, an IL-17A monoclonal antibody injection. IL-17A plays a critical role in the pathogenesis and progression of more than ten autoimmune diseases, including psoriasis, axial spondyloarthritis, and lupus nephritis. However, antibody drugs targeting IL-17 are characterized by high prices and low penetration rates. The three IL-17A antibody drugs currently marketed in China—Secukinumab, Ixekizumab, and Brodalumab—are manufactured by Novartis, Eli Lilly, and Kyowa Kirin, respectively, with no domestically produced alternatives available at present.

GENRIX BIO’s secukinumab injection was accepted by the Center for Drug Evaluation (CDE) in March 2023 and is poised to become one of the first domestically produced IL-17A monoclonal antibody products to reach the market. Based on previously disclosed clinical trial data, secukinumab achieved a PASI 75 response rate of 98.8%. Even among patients who did not respond after 12 weeks of treatment, administering the drug once every four weeks thereafter resulted in a PASI 75 response rate of 82.4% by Week 52.

In 2022, the combined global sales of secukinumab and ixekizumab totaled approximately USD 7.27 billion. If surikimab successfully launches with robust commercialization efforts, GENRIX BIO’s revenue could experience a qualitative leap. However, it is worth noting that eight domestic IL-17-targeting biosimilars for psoriasis are currently in various stages of clinical development. Notably, Jiangsu Hengrui Medicine recently announced that its marketing application for funakizumab injection (SHR-1314) has been accepted by the Center for Drug Evaluation (CDE). With numerous competitors in the field, being the first mover does not necessarily guarantee success.

Another key target heavily bet on by GENRIX BIO is IL-4Rα. The asthma and moderate-to-severe atopic dermatitis indications of its pipeline candidate GR1802 have entered Phase II clinical trials. In the domestic market, Sanofi’s Dupixent currently dominates this target space. Furthermore, Conmed Biopharma’s clinical progress far surpasses that of GENRIX BIO, with its CM310 having entered Phase III clinical trials as early as February last year.

Building on the core expertise of Zhifei Biological, GENRIX BIO has also made significant strides in the vaccine sector, with its most advanced candidate being GR1801, a recombinant fully human bispecific antibody injection targeting the rabies virus G protein. As the world’s first bispecific antibody for passive immunization against rabies, GR1801 provides immediate immune protection during the window period between the initial rabies vaccination and the body’s production of sufficient endogenous antibodies. In this field, the domestic antibody drug is Omuviromab from North China Pharmaceutical Group, with undisclosed sales figures.

In the oncology field, GENRIX BIO is currently focusing on developing bispecific antibody products for hematologic malignancies, with candidates targeting melanoma and head and neck squamous cell carcinoma indications in the preclinical stage.

GENRIX BIO’s Pipeline Layout, Source: Company Prospectus

In the development of antibody-based therapeutics, both antibody discovery and process development serve as competitive barriers. GENRIX BIO states that the company has established two technology platforms for source innovation: a monoclonal antibody drug discovery platform based on a novel phage display system, and a bispecific antibody drug discovery platform. In the drug development phase, GENRIX BIO has built an efficient process development platform for recombinant antibody drugs and has completed process development and pilot-scale production for 10 therapeutic antibodies.

GENRIX BIO is well aware that a successful antibody drug product can propel the company into the ranks of biopharma. Backed by the cash-rich Zhifei Biological, GENRIX BIO has demonstrated its ambition to secure a foothold in the innovative drug market through substantial investment and a diversified portfolio.

GENRIX BIO’s indicative price range was RMB 21.14–58.60 per share, with the final offering price set at RMB 37.88 per share, resulting in a post-IPO market capitalization of RMB 14 billion. The elevated pricing and uncertain revenue prospects have subjected the company to significant scrutiny. In 2021, the only year in recent times when its annual revenue exceeded RMB 10 million, GENRIX BIO recorded RMB 39.1902 million in revenue, 99.51% of which came from its major customer, Zhifei Longkema, a wholly owned subsidiary of Chongqing Zhifei Biological Products Co., Ltd.

Following its listing, GENRIX BIO will still require substantial capital to fund the R&D of its multiple pipeline candidates, while also needing to build a commercialization team from scratch. The market has long perceived the commercial promotion of autoimmune products as characterized by “slow volume ramp-up and significant challenges in market education and promotion.” Although GENRIX BIO might potentially “leverage” the team or network of Chongqing Zhifei Biological Products Co., Ltd., all outcomes remain uncertain.

For R&D-driven listed companies like GENRIX BIO, it will take time to align with the conventional investment logic of the A-share market. In the innovative drug sector, where failures outnumber successes, investors are buying into future expectations of the company and the potential revenue from its pipeline. However, the significant uncertainties inherent in innovative drug development can either turn a consistently loss-making company into a capital market darling overnight, or strip many promising, seemingly on-the-verge-of-success pipelines of their luster.

According to Jefferies Group data, the U.S. stock market experienced a financing boom in the biotechnology sector from 2018 to 2019, during which 100 biotech companies completed initial public offerings (IPOs) and 270 companies carried out post-listing refinancing, raising tens of billions of dollars in cash. Many of these companies had no revenue at the time of their IPOs, and their drug pipelines were still in early stages.

Over the past few years, some companies have struggled to sustain operations, while others have advanced strategically and made significant progress in R&D, repeatedly boosting their stock prices and attracting acquisition interest from multinational corporations (MNCs).

The number of biotech companies listed on the U.S. stock market and their financing amounts dropped sharply last year, and the IPO process for biotechnology companies this year remains the slowest start in nearly five years. According to statistics from BioPharma Dive, among the 15 recently listed biotech startups, nine raised no more than $15 million.

Currently, with capital support, some outstanding companies are able to list on the secondary market within just a few years of establishment. Examples include those whose core products originate from major pharmaceutical companies or world-leading academic institutions, or those whose clinical data for core products have been published in top-tier medical journals. However, not all innovative drug companies can reach the harvest phase. Innovative technologies and compelling products remain the ultimate hard currency. We believe that only by fostering more such companies can we restore market confidence and bring credibility to the biopharmaceutical industry.