Viva Biotech Successfully Lists on Hong Kong Stock Exchange with Global-Leading Drug Discovery Technologies

Artery New Medicine (WeChat ID: biobeat1) has learned that on May 9, 2019, Viva Biotech successfully listed and began trading on the Hong Kong Stock Exchange, with the stock code 1873.HK. The IPO raised approximately USD 194 million (excluding the over-allotment option). China Renaissance served as joint bookrunner and joint lead manager in this transaction.

Viva Biotech officially launched the global roadshow for its Hong Kong initial public offering (IPO) on April 23, 2019. The offering comprised 345 million shares (excluding the over-allotment option), priced at HK$4.41 per share. The proceeds will be used to invest in and incubate more biotech start-ups in China and overseas, establish biological and chemical contract manufacturing organizations (CMOs), purchase laboratory equipment and materials, recruit and train talent, and for general corporate purposes. The IPO attracted significant investor interest, with the Hong Kong public offering portion oversubscribed by 107 times. At the time of writing, Viva Biotech’s share price stood at HK$4.50.

Data from Xueqiu

Viva Biotech, founded in Shanghai, China in 2008 and headquartered in the Zhangjiang Hi-Tech Park, is a structure-based integrated drug discovery platform company. The platform features four core technologies: “Structure-Based Drug Discovery,” “Fragment-Based Drug Discovery,” “Affinity Mass Spectrometry Screening,” and “Targeted Membrane Protein Drug Development.” Supported by technical platforms including in vitro pharmacology, medicinal chemistry research, antibody screening, and molecular cloning, the company has built a robust early-stage innovative drug R&D technology platform.

Viva Biotech is a world leader in protein- and structural biology-based drug discovery services. Over the past decade, Viva Biotech has studied more than 1,000 target proteins and delivered approximately 9,500 independent protein structures to support its clients. Leveraging its leading core technologies, Viva Biotech has provided drug discovery services to nine of the top ten global pharmaceutical companies (by 2018 revenue), as well as hundreds of biotechnology companies and research institutes worldwide.

Specifically, Viva Biotech’s services comprehensively address clients’ needs throughout early-stage drug discovery, spanning target protein expression and structural studies, drug screening, lead compound optimization, and the identification of clinical candidates.

Drug Discovery Process and Viva Biotech Services (Image from the Prospectus)

Viva Biotech designs constructs, performs expression testing, and selects plasmids with favorable expression results for scaled-up expression, followed by protein purification and crystallization, all in accordance with client requirements. Viva Biotech leads its industry peers in the structural study of drug target proteins. Statistics show that during the three years prior to its listing, Viva Biotech utilized over 67% of the average industrial beamtime at the Shanghai Synchrotron Radiation Facility (SSRF), one of the world’s four major third-generation synchrotron radiation centers.

Leveraging ASMS screening technology and diverse compound libraries, Viva Biotech has built a proprietary compound discovery engine platform that delivers rapid turnaround and flexible lead compound discovery services for any soluble protein, while also enabling the screening of clients’ compound libraries.

Leveraging its world-class patented technologies for membrane protein expression and screening, Viva Biotech provides comprehensive small-molecule and antibody drug discovery services. Typically, clients need only provide the target name, and Viva Biotech delivers end-to-end drug discovery solutions, enabling them to complete the entire R&D process from target identification to clinical development candidates.

Covering the journey from hit compounds to lead compounds and lead optimization, Viva Biotech specializes in traditional structure-activity relationship (SAR) analysis, meticulously designing and synthesizing series of compounds, and advancing biological activity testing and evaluation.

Including generating stable cell lines, developing assay methods, and screening compounds based on the developed assays.

Including antigen preparation, antibody discovery, optimization, humanization, maturation, affinity measurement, laboratory-scale and large-scale purification, and structural determination of antibody-antigen complexes to identify the epitopes bound by the antibodies.

In terms of business model, Viva Biotech has developed a unique and scalable model that combines the traditional Cash-for-Service (CFS) model with its proprietary Equity-for-Service (EFS) model. Under the EFS model, Viva Biotech provides drug discovery and/or incubation services to biotechnology groups with strong growth prospects in exchange for equity or economic interests in these clients.

By holding equity or economic interests in these investment targets, Viva Biotech can maintain stable cash inflows from its CFS clients while effectively promoting the development of promising biotechnology start-ups and capturing the upside potential of their intellectual property value. Furthermore, Viva Biotech may make strategic investments in biotechnology start-ups that it identifies as having future collaboration opportunities.

As of April 15, 2019, Viva Biotech had incubated 31 early-stage R&D projects, among which 11 incubated investee companies had completed private financing. Since 2014, Viva Biotech has established two incubation centers and plans to add several standardized incubation centers, each with an area of approximately 3,000 square meters, in Shanghai, Jiaxing, and Chengdu, with an expected annual incubation capacity of 12 early-stage R&D projects.

In 2018, Viva Biotech completed full or partial exits from four incubated investee companies, each achieving a return on investment exceeding 200%. Furthermore, Viva Biotech plans to add approximately 21, 35, and 50 incubation projects in 2019, 2020, and 2021, respectively.

Cumulative Number of Incubated Projects (Image Source: Prospectus)

In terms of revenue, Viva Biotech achieved a compound annual growth rate (CAGR) of 47.54% in the three years prior to its IPO, with the United States being its primary source of revenue. In the table below, FTE refers to revenue generated under the Full-Time Equivalent pricing model; FFS refers to revenue from Fee-for-Service projects; and SFE refers to revenue from the Service-for-Equity model.

Revenue Performance in the Three Years Prior to IPO (Image Source: Prospectus)

In terms of profitability, Viva Biotech achieved positive net profits of tens of millions of Hong Kong dollars in each of the three years prior to its listing. From 2016 to 2018, its net profit margins were 25.36%, 51.44%, and 43.11%, respectively, with a compound annual growth rate (CAGR) of net profit reaching 92.35%.

Income Statements for the Three Years Prior to Listing (Image Source: Prospectus)

Healthcare and life sciences have been a sector of focus and deep cultivation for China Renaissance for many years, with the firm having served as financial advisor on over 70 financing and M&A transactions to date. Viva Biotech’s listing in Hong Kong marks the third Hong Kong IPO in the healthcare and life sciences sector in which China Renaissance has participated. Serving as joint bookrunner and joint lead manager, China Renaissance has once again reaffirmed its position as the trusted investment banking partner for leading high-growth new economy companies worldwide.

Over the past year, China Renaissance has witnessed significant milestones for numerous outstanding new-economy enterprises. These include participating in the completion of Hong Kong IPOs for companies such as WuXi AppTec, BeiGene, Meituan Dianping, and Maoyan Entertainment, as well as U.S. IPOs for TCR² Therapeutics, Tencent Music, Mogujie, iQIYI, and Pinduoduo.

Since 2013, China Renaissance has successively facilitated the overseas listings of dozens of Chinese new economy companies, including JD.com, ZTO Express, Uxin, Four Seasons Education, and China Literature. This transaction further demonstrates China Renaissance’s capability in providing international capital market services to its clients, as well as the strong execution and underwriting prowess of its team in overseas capital market transactions.