Eight Unprofitable Biopharma Firms Race to List on STAR Market Under Rule Set Five

With the continuous advancement of commercialization, Shenzhen Northcore Life Technology Co., Ltd. (hereinafter referred to as "Northcore Life") has achieved a turnaround from losses, and this recently registered medical device company is also about to enter the issuance stage, becoming a vivid example of pharmaceutical enterprises striving for the capital market under the fifth set of listing standards of the STAR Market. Since the beginning of this year, with the resumption of the review of the fifth set of listing standards of the STAR Market, the previously quiet IPO market for pharmaceutical enterprises on the STAR Market has regained vitality.

According to statistics, six pharmaceutical companies, including Zhuhai Trinomab Biopharmaceutical Co., Ltd. (hereinafter referred to as "Trinomab"), have had their STAR Market IPOs accepted this year. As of now, there are eight pharmaceutical companies in the queue for STAR Market IPOs, all applying for listing under the fifth set of standards of the STAR Market. Notably, Shanghai Hengrun Dason Biotechnology Co., Ltd. (hereinafter referred to as "Hengrun Dason") and Harbin Sizhe Rui Intelligent Medical Equipment Co., Ltd. (hereinafter referred to as "Sizhe Rui") began the process as early as 2022. However, after the resumption of the fifth set of listing standards for the STAR Market IPO, there has been no new progress apart from updating financial information.

Eight pharmaceutical companies in queue

As of December 25, there are eight pharmaceutical companies in the queue for IPO on the Sci-Tech Innovation Board, all of which have applied for listing under the fifth set of standards of the Sci-Tech Innovation Board. Among them, NCV Life is the closest to going public, with its registration already effective. On December 22, the official website of the Shanghai Stock Exchange updated the IPO status of NCV Life, showing that the company’s IPO on the Sci-Tech Innovation Board had become effective on December 18. The prospectus reveals that NCV Life is a national high-tech enterprise specializing in the research, production, and sales of innovative medical devices for precision diagnosis and treatment of cardiovascular diseases.

The IPO journey of Northcore Life reveals the changes in regulatory attitudes towards unprofitable pharmaceutical companies on the Sci-Tech Innovation Board in recent years. Reviewing Northcore Life's IPO process on the Sci-Tech Innovation Board, the company’s IPO was accepted on March 30, 2023, and then entered the inquiry phase in April. Following the resumption of the fifth set of listing standards review on the Sci-Tech Innovation Board, Northcore Life successfully passed the listing committee meeting on July 18 this year, submitted its registration on July 25, and has now been officially registered.

As a company applying for listing on the Sci-Tech Innovation Board under the fifth set of listing standards, Beixins Life reported net losses during the reporting period at the time of its IPO filing. However, during the IPO queueing process, Beixins Life turned a profit. According to the company's registration document, in the first quarter of this year, Beixins Life achieved revenue of 128 million yuan, representing a year-on-year increase of 104.9%; the attributable net profit was 20.6061 million yuan, reversing the loss from the previous year.

In addition, with the resumption of the fifth set of listing standards for the Sci-Tech Innovation Board (STAR Market), five unprofitable pharmaceutical companies have had their STAR Market IPOs accepted this year. Among them, Trinomab was the first company to be accepted after the resumption of the fifth set of listing standards, receiving approval on July 31 this year. The company is an innovative biopharmaceutical enterprise targeting the global market and focusing on alternative therapies for blood products. Meanwhile, Shenzhen Core Medical Technology Co., Ltd. became the first innovative medical device company to be accepted after the resumption of the fifth set of listing standards, with its STAR Market IPO being accepted on November 6. The company specializes in artificial heart products. Suzhou Xennovate Pharma Tech Co., Ltd. ("Xennovate"), which was accepted on December 22, is the company with the highest proposed fundraising amount among the five unprofitable pharmaceutical companies accepted this year, planning to raise 2.94 billion yuan for new drug research and development projects and working capital replenishment.

Two existing companies have been waiting in line for a long time.

Apart from the five enterprises newly accepted within the year and Beixins Life, which has just registered and taken effect, the pharmaceutical enterprises currently queued for the STAR Market IPO also include Hengrun Dason and Sizhe Rui, both of which are applying for listing according to the fifth set of standards.

From the perspective of review progress, Sizhe Rui is a step ahead. The company's IPO was submitted for registration as early as June 25, 2023, but it has not yet received the registration approval. The prospectus shows that Sizhe Rui is a high-tech enterprise focusing on the research, development, production, and sales of surgical robots. In this STAR Market IPO, Sizhe Rui plans to raise 2.029 billion yuan for four projects: the surgical robot R&D project, the surgical robot industrialization project, the marketing network construction project, and replenishment of working capital.

Hengrun Dason Falls Behind in IPO Progress. The official website of the Shanghai Stock Exchange shows that Hengrun Dason's Sci-Tech Innovation Board IPO entered the inquiry stage on November 11, 2022. On September 30 this year, due to the expiration of the financial data recorded in the issuance and listing application documents, supplementary submission was required, and Hengrun Dason's Sci-Tech Innovation Board IPO was suspended. It is still in the suspended stage and has not yet been granted an opportunity for a hearing. The prospectus shows that Hengrun Dason is an innovative biopharmaceutical company focusing on the research and production of breakthrough immunotherapy products, primarily concentrating on treatment areas such as malignant hematological diseases and solid tumors.

It is worth mentioning that Hengrun Dason changed its auditing firm during the IPO queue process. According to the initial version of the prospectus, Hengrun Dason had appointed PricewaterhouseCoopers Zhong Tian LLP as its auditing firm, but it has now been changed to Rongcheng Certified Public Accountants (Special General Partnership).

In terms of waiting time, both Hengrun Dason and Sizhe Rui have waited for more than three years, with Hengrun Dason having a longer wait. The company's STAR Market IPO was accepted on October 18, 2022, while Sizhe Rui's was accepted on October 31, 2022.

Due to the lack of profitability and the delay in going public for fundraising, Hengrun Dason's asset-liability ratio has continued to rise. Financial data shows that from 2022 to 2024, Hengrun Dason's asset-liability ratios were 20.34%, 59.98%, and 84.76%, respectively.

Regarding relevant issues of the company, a Beijing Business Today reporter sent an interview letter to Hengrun Dason, but as of the time of writing, no response had been received from the company.

Seven companies have achieved product launch

The Beijing Business Journal reporter noticed that, compared with a few years ago, among companies applying for listing under the fifth set of standards of the STAR Market, although they have not yet achieved profitability, the absence of commercialization is no longer a universal phenomenon. Among the eight companies currently in the queue, seven have already launched their products on the market.

Among them, Hengrun Dason had not yet achieved commercialization at the time of filing. Its main product, Ranikio Rencel Injection, was approved for marketing on July 30 this year. It is reported that this injection is also China's first completely self-developed CD19 CAR-T product for relapsed or refractory large B-cell lymphoma (r/r LBCL).

Trinomab's core product, Stedutamab Injection (trade name: Xintitu), was approved for marketing in China this February. It is the world's first-in-class recombinant anti-tetanus toxin monoclonal antibody drug and the first domestically produced innovative biologic in the anti-infective field to be designated as a breakthrough therapy. However, the actual sales of Stedutamab after its market launch fell short of expectations. From March to September this year, the projected sales volume of Stedutamab was 96,900 vials, but the actual sales volume was only 46,100 vials, achieving 47.6% of the target.

Currently in the queue of pharmaceutical companies, Cynova is the only company that has not yet marketed any products. Cynova stated that its first drug, Imenixif injection, is expected to be approved for marketing next year. In addition, as of the date of the signing of the prospectus, Cynova has developed 10 major R&D pipelines targeting several significant disease areas with broad market potential, such as cancer and anti-infective fields. Among them, XNW5004 (EZH2 inhibitor), XNW27011 (Claudin18.2-targeted ADC), and XNW28012 (TF-targeted ADC) in the oncology field are all in Phase III or pivotal clinical research stages.

Deputy Chairman of the China Enterprise Capital Alliance, Bai Wenxi, stated that when regulatory authorities review unprofitable pharmaceutical companies, they focus on four core aspects: "How strong is the technology, how large is the market, whether there is enough funding, and how high is the delisting risk." Chang Xianping, Standing Vice Secretary General of the Urban Experts Think Tank Committee and Associate Professor at Zhejiang City College, similarly believes that the core of IPOs for unprofitable pharmaceutical companies lies in clinical value and commercialization certainty, with regulation revolving around "true innovation, sustainability, and verifiability." During the review process, regulators pay closer attention to R&D and clinical trials, valuation alignment, ongoing operations, compliance and internal controls, and sci-tech attributes for unprofitable pharmaceutical enterprises.