Nearshore Protein Becomes First mRNA Enzyme Stock Listed on STAR Market as Domestic mRNA Vaccines Remain in Phase III Trials

Today, Novoprotein Scientific Inc. officially listed on the STAR Market, issuing 17.54386 million RMB ordinary shares to the public at an offering price of RMB 106.19 per share.

Novoprotein, Sino Biological, and ACROBiosystems are known as the “Big Three” of domestic protein reagent companies. Sino Biological and ACROBiosystems were listed on the ChiNext Board in August 2021 and October 2021, respectively.

Previously, the direct competitive landscape for the “Big Three” was confined to the traditional market for recombinant proteins, such as target and factor proteins and recombinant antibodies. However, foreign brands hold a significant advantage in this sector, making domestic substitution the prevailing theme of the industry. In 2020, the combined market share of these three manufacturers in China’s recombinant protein research reagent market was only 20.3%.

Therefore, among the three categories of products in Novoprotein’s portfolio—target and factor proteins, recombinant antibodies, and enzymes and reagents—Undoubtedly, the most closely watched segment is the market for mRNA raw material enzymes—a new investment opportunity emerging within the relevant industrial chain in China, even before the commercialization of domestic mRNA vaccines.

The capital markets are eager to hear new narratives in the recombinant protein sector, as staking out territory in novel, high-potential fields is what truly energizes investors and the market.

Whether as a leading domestic supplier of mRNA raw material enzymes or, today, as the first publicly listed company in this sector to debut on the STAR Market, Novoprotein aims to craft a new business narrative.

On January 19, 2022, Novoprotein Scientific Inc. received its first round of inquiries from the Shanghai Stock Exchange after submitting its prospectus, which came as no surprise; the inquiries focused on COVID-19 and the sustainability of future performance growth.

Novoprotein Scientific Inc. responded to inquiries by stating that the company has developed new growth drivers, which are expected to ensure sustained and stable performance. These new growth drivers are mRNA raw material enzymes.

In the field of recombinant protein research reagents, Novoprotein Scientific Inc. competes directly with two ChiNext-listed companies, ACROBiosystems and Sino Biological. According to Frost & Sullivan data, in 2020, these three major domestic recombinant protein manufacturers—Novoprotein Scientific Inc., Sino Biological, and ACROBiosystems—collectively held only a 20.3% share of the Chinese market. In fact, China’s recombinant protein industry started relatively late, and domestic brands still lag significantly behind foreign counterparts in R&D capabilities, quality control, large-scale production, and brand influence. As a result, the domestic recombinant protein market has long been dominated by major international manufacturers such as R&D Systems, PeproTech, and Thermo Fisher Scientific.

Therefore, the future market potential for existing products primarily hinges on whether domestic brands can achieve import substitution by enhancing product quality and performance, while leveraging advantages in supply lead times, pricing, and services.

In recent years, mRNA raw material enzymes used in recombinant protein products have gradually gained significant traction, with companies such as Novoprotein Scientific Inc., Yeasen Biotechnology, Zhaowei Technology, and Vazyme initiating strategic layouts in this area.

“mRNA raw material enzymes are in a transitional phase from research to industrialization, and from small-scale to large-scale production.”"A senior investor in this field told VCBeat New Medicine that the mRNA industrial enzyme market is currently at a relatively early stage."

According to reports, mRNA raw material enzymes belong to the upstream segment of the mRNA industry chain. Before the COVID-19 pandemic, the market for mRNA raw material enzymes was still in its infancy, with few manufacturers producing these enzymes. Moreover, their products were primarily at the research grade, supplied to academic and research institutions. The user base was small and fragmented, resulting in a limited market size. Following the outbreak of COVID-19, the rapid approval of mRNA vaccines abroad ignited a surge in domestic mRNA vaccine and drug development, thereby accelerating the growth of the upstream mRNA raw material enzyme sector. However, as domestic mRNA vaccines and drugs have not yet been launched on the market, China’s mRNA raw material enzyme industry is currently in a transitional phase from small-scale production to large-scale industrial manufacturing.

However, relevant research reports have already pointed out thatmRNA enzymes are the most critical raw materials and represent the largest segment of the industrial value chain.

mRNA vaccine production primarily consists of two stages: the production and purification of the active pharmaceutical ingredient (API), i.e., mRNA, and formulation (encapsulation using lipid nanoparticles). In vitro transcription of mRNA during API manufacturing is the core step in the entire mRNA process flow, requiring the participation of a series of enzymes. According to Frost & Sullivan estimates, raw material costs constitute the major component of mRNA vaccine production costs, accounting for approximately 58% of total production costs. Among these, enzyme raw materials represent about 39.58% of raw material costs, driving rapid growth in the market size of enzyme raw materials required for mRNA therapies.

The market size of enzyme raw materials required for mRNA therapies in China was RMB 150 million in 2020 and is projected to reach RMB 1.47 billion by 2025, with a compound annual growth rate (CAGR) of approximately 58.2%. In contrast, the CAGR for the domestic recombinant protein market from 2020 to 2025 is only about 18.4%. Although the current domestic market size for mRNA therapeutic enzymes remains relatively small, its rapid growth rate, broad applicability across therapeutic areas, and significant market potential are evident.

Internationally leading mRNA vaccine companies, such as Moderna and BioNTech, have already launched mRNA vaccines and are actively developing multiple mRNA product pipelines that have entered clinical stages. China’s mRNA vaccine industry is also experiencing a period of rapid development, with Abogen Biosciences–Walvax Biotechnology’s COVID-19 mRNA vaccine currently in Phase III clinical trials. In addition, several domestic biopharmaceutical companies, including Stemirna Therapeutics, Raynovax Biotech, and Magpie Biotech, are actively conducting clinical research on mRNA vaccines.

If COVID-19 mRNA vaccines are approved in China and become a “blockbuster” as hoped, demand could be unleashed rapidly, significantly boosting the revenues of upstream companies.

In fact, the application scenarios for mRNA enzymes extend beyond mRNA vaccine manufacturers to include cell and gene therapy (CGT) companies utilizing mRNA technology, such as ImmuneOnco, Porton Biopharma, and Obio Technology, as well as numerous other fields including in vitro diagnostics and fundamental life sciences research.

As mRNA-related products progress from Phase I, II, and III clinical trials toward market approval, the scale of the upstream industry will expand in a funnel-like pattern.Although the current market size is limited, upstream raw material suppliers are likely to see steady revenue growth if sectors requiring mRNA enzyme supplies, such as mRNA vaccines and cell and gene therapy (CGT), develop in the future.

Whether waiting for a “blockbuster” or for the industry scale to steadily expand, companies currently positioning themselves in this field are largely “betting” on the future.

Why “Bet” on the Future? The upstream logic of the biopharmaceutical industry largely follows this pattern: once the manufacturing process for raw material products is finalized, it is difficult to switch. Foundational products must be perfected before the industry reaches the threshold of large-scale production. Waiting until the industry has already taken off would be too late.

Specifically, in the mRNA raw material enzyme market,Its technology-intensive nature, heavy asset investment, and emphasis on commercial business development (BD) further dictate that early strategic positioning is essential for entering this industry.

The primary technical barrier for enzyme and reagent products lies in the capability for enzyme engineering, which encompasses multiple core performance indicators such as enzyme activity, expression level, thermal stability, catalytic efficiency, and inhibitor tolerance.

In terms of capital expenditure, the costs for bulk market commodities such as fermentation shakers and bioreactors are substantial. For instance, Novoprotein’s annual rental cost for related equipment at its mRNA raw material enzyme production base (Novoprotein Heze) reached RMB 4.6838 million.

Moreover, national policies do not support the replacement of raw material suppliers, and switching from existing suppliers would incur substantial quality audit costs and time commitments. This results in strong stickiness between existing raw material suppliers and their customers.

For Novoprotein, betting on mRNA raw material enzymes is a natural development logic at present. Currently, Novoprotein ranks first among domestic manufacturers in China's mRNA raw material enzyme and reagent market. According to Frost & Sullivan data, it held a 39.8% market share in the domestic market in 2021.

It is not just Novoprotein Scientific Inc.; other companies that have previously focused on research-grade enzymes, such as Yeasen Biotechnology, Zhaowei Technology, and Vazyme, are also strategically positioning themselves in this sector. However, transitioning from research to industrial applications represents a significant shift. Industrial-grade enzymes demand far greater stability in quality than their research-grade counterparts, because industrial Chemistry, Manufacturing, and Controls (CMC) requirements are strictly defined. Any fluctuation in enzyme quality can disrupt downstream industrial processes.

“Moreover, prior to the pandemic, only a few companies were researching mRNA for research-grade enzymes; it was COVID-19 that drove industrial development, which in turn spurred scientific research.“a senior industry insider said.”

Few companies possess the capability to undergo such transformation; typically, only large-scale enterprises do.First, companies must have the capability to build robust systems, the confidence to reach a sufficiently large customer base to ensure stable supply and control costs, as well as strong financial resources. Second, there are commercial barriers: customers place high value on supply stability and service assurance. Therefore, mRNA raw material enzyme suppliers must continuously accumulate commercial client case studies to earn the trust of future customers.

In its prospectus, Novoprotein Scientific Inc. emphasized that it had already entered the mRNA raw material enzyme sector in 2013. However, an analysis of Novoprotein’s development history reveals that it was not until 2020, driven by the COVID-19 pandemic and supported by nearly RMB 30 million in financing, that the company officially achieved large-scale production of mRNA raw material enzymes. In 2020, the company generated only RMB 2.8858 million in revenue from mRNA raw material enzymes and reagents. In 2021, Novoprotein seized market opportunities and became one of the key suppliers to major domestic mRNA vaccine developers such as Walvax Biotechnology and Abogen Biosciences, resulting in approximately RMB 130 million in revenue from its mRNA raw material enzymes and reagents.

Therefore, Novoprotein has inevitably faced scrutiny, mostWidespread skepticism has focused on the high proportion of COVID-19-related business and the risks associated with Walvax Biotechnology as a single, concentrated customer.

According to the prospectus, as of May 15, 2022, Novoprotein Scientific Inc. had supplied mRNA raw material enzymes and reagents to more than 60 vaccine and pharmaceutical manufacturing clients, including Walvax Biotechnology, Abogen Biosciences, Livanda Biotechnology, and SwellBio. However, the customer concentration for Novoprotein’s mRNA raw material enzymes and reagents business is extremely high, with Walvax Biotechnology being its primary client. In 2021, Walvax accounted for approximately 95% of the company’s revenue from mRNA raw material enzymes and reagents.

Excessive customer concentration and reliance on a single client have placed Novoprotein in a passive position, making its performance revenue highly vulnerable to sharp declines if any major customer reduces or cancels purchases of the company’s related products.

Aosikang, a CDMO company also grappling with excessive customer concentration, incurred losses of nearly RMB 70 million after its client CanSino Biologics terminated their collaboration.

In 2020, Auscan became the sole external supplier of adenovirus vaccine drug substance and the exclusive supplier of cell culture media for CanSino Biologics. In 2021, sales to CanSino accounted for as high as 63.73% of Auscan’s operating revenue for that period. However, on January 13, 2022, due to adjustments in vaccine production regulatory policies, CanSino terminated its contract with Auscan for the contracted manufacturing of adenovirus vaccine drug substance (other CDMO businesses of Auscan were unaffected). According to Auscan’s prospectus (draft filing), the company recorded approximately RMB 69.599 million in losses from the scrapping of CanSino’s COVID-19 vaccine drug substance and culture media products caused by production interruptions, among other factors, as administrative expenses, accounting for 15.42% of its operating revenue for that year.

Secondly, Novoprotein’s revenue directly related to COVID-19 accounted for an excessively high proportion. According to the prospectus, after simulated calculations, the company’s COVID-19-related business revenue was approximately RMB 110 million and RMB 260 million in 2020 and 2021, respectively, representing 62.98% and 74.8% of its total main business revenue for those years.

According to the prospectus data of Sino Biological and ACROBiosystems, in 2020, the proportion of revenue from COVID-19-related products for Sino Biological and ACROBiosystems was 84.07% and 29.52%, respectively.Sino Biological, with an Excessively High Proportion of COVID-19-Related Business,In the first half of 2022, operating revenue reached RMB 299 million, a year-on-year decrease of 52.84%, with revenue from COVID-19-related businesses dropping by 76.33% year on year;Whereas ACROBiosystems, with a relatively low proportion of its business derived from COVID-19-related products,In the first half of 2022, the company achieved operating revenue of approximately RMB 229 million, representing a year-on-year increase of 30.55%, with revenue from non-COVID-19 prevention and control products rising by 41.95% year on year.

Yeasen Biotechnology also prioritized the proportion of COVID-19-related products to maintain break-even. In 2020 and 2021, the share of sales revenue from Yeasen Biotechnology’s COVID-19-related products was 24.77% and 25.42%, respectively.

In fact, as downstream products gradually transition from the clinical stage to mass production, the market size for mRNA raw material enzymes is expanding. Consequently, market entrants are compelled to proactively establish a certain level of production capacity. Currently, the supply-demand dynamics in this sector are particularly unique, characterized by constant fluctuations and significant uncertainty. Should the market fail to meet expectations, the resulting financial losses for companies would be substantial.

With the many cautionary tales of COVID-19 concept stocks in the capital markets, investors have clearly become more cautious.By choosing to “bet big” on the mRNA raw material enzyme market and pursuing the current business development (BD) path, is Novoprotein Scientific Inc. making a highly forward-looking strategic move, or is there a significant element of gambling involved?Can this new business story reach a successful conclusion? The opportunities and challenges facing Novoprotein are equally significant.

Of course, the positive aspect is that this sector has just begun to emerge in China, with neither foreign nor domestic companies holding a clear advantage. In 2021, Novoprotein Scientific Inc. ranked first among domestic manufacturers in China’s mRNA raw material enzyme and reagent market, capturing a 39.8% share of the domestic market and rivaling Thermo Fisher Scientific.

““At the outset, companies were relatively small in scale. Whether driven by pandemic-induced revenue growth or organic development, many firms have now reached a significant size, and the industry has essentially entered its second half,” a senior investor told VCBeat New Medicine.

Over the past year or so, China’s “big three” protein reagent companies—Sino Biological, ACROBiosystems, and Novoprotein Scientific Inc.—have all entered the capital markets. In November 2021, Vazyme also successfully listed on the STAR Market. This June, Yeasen Biotechnology’s IPO application for the STAR Market was accepted, sending a positive signal to the industry.

Can domestic recombinant protein companies, bolstered by capital, maintain their rapid growth momentum and even give rise to new industry giants? Time will tell.