Research on the nature of science and technology ｜ Hengrun Dasheng IPO： The core product indicators did not reflect obvious technical advantages. In the past six years, only two invention patents were

Source: Sina Securities

　　Produced by: Sina Finance Research Institute of Listed Companies

　　Author: IPO Refinancing Group/Qin Mian

　　Judging from the IPO companies that have been rejected and withdrawn recently, science and technology innovation board not only sticks to the hard technology positioning as always, but also pays more attention to the ability of sustainable operation. If rejected, Taimei Technology was asked at the meeting of the Shanghai Municipal Party Committee about the impact of large losses on the ability to continue operations and the changes of factors affecting profitability during the reporting period; The rejected Spitzer was asked at the meeting of the Shanghai Municipal Party Committee about the continuous losses, the sharp drop in net assets and the sustainability of business ability during the reporting period.

　　As of May 23, 2023, there are 109 IPO enterprises under trial in science and technology innovation board (based on acceptance, excluding registered effective and terminated enterprises). Among the 109 enterprises, 44 companies have suffered losses during the reporting period, 28 companies are losing money in the latest financial report, and 25 companies have been losing money during the reporting period.

　　Among the 109 companies, 10 companies that intend to IPO have zero or almost zero revenue, and all of them suffered losses during the reporting period. Whether an IPO enterprise with zero revenue can realize the commercialization of its main products is an important index to evaluate whether the company has the ability of sustainable operation, and it is also the key to whether it can be listed in science and technology innovation board. In addition, enterprises with zero revenue adopt the fifth set of listing standards and need to meet the "obvious technical advantages", where "obvious" is one of the core signs to distinguish other listing standards.

　　Among the 10 companies, the actual controller is Hengrun Dasheng of Putian Department, and the technical indicators of the main core products have no obvious technical advantages, and several similar products have been listed in the market. Although the company has invested a lot of R&D expenses every year and 430 million yuan in three and a half years, it has only had two invention patents in the last six years, which is significantly inferior to comparable companies in the same industry.

　　Core product indicators do not reflect obvious technical advantages.

　　According to the prospectus, Hengrun Dasheng is an innovative biomedical company focusing on the research and development and production of breakthrough immune cell therapy products, mainly focusing on the treatment fields such as malignant hematological diseases and solid tumors. As of the signing date of the prospectus, the indications of HR001 for the treatment of relapsed/refractory B-cell non-Hodgkin’s lymphoma (r/r B-NHL) and HR003 for the treatment of relapsed/refractory multiple myeloma (r/r MM) have been in the phase II registered clinical trial stage, and HR001 and HR003 are the two core products of the company.

　　In 2019-2021 and the first half of 2022, the main business income of Hengrun Dasheng was zero, and the net profit attributable to the mother was-117 million yuan,-103 million yuan,-193 million yuan and-117 million yuan respectively. The income from the main business is zero, and all losses occurred during the reporting period. If Hengrundasheng wants to land in science and technology innovation board, he can only choose the fifth set of listing standards, because the minimum requirements for the other four listing standards are 100 million yuan.

　　However, according to the "Guidelines for the Application of science and technology innovation board Listing Rules of Shanghai Stock Exchange No.7-Application of the Fifth Set of Listing Standards for Medical Device Enterprises", the issuer of an enterprise adopting the fifth set of listing standards should have obvious technical advantages. Does Naheng Rundasheng have obvious technical advantages? We can analyze the two core products of the company, that is, the two products closest to commercialization.

　　According to the data, among the similar products of Hengrundasheng HR001 products, that is, similar products for treating r/r B-NHL, two products have been listed in China, namely Yikaida and Benoda. Compared with two competing products that have been listed, Hengrun Dasheng has lost its competitive advantage in the first round.

　　In addition, the main indicators of HR001 products of Hengrun Dasheng have no obvious competitive advantage, and even some indicators are not as good as competing products. For example, the best ORR of HR001 is 66% (the higher the better, the same below), and the data of four competing products are 72%, 73%, 79% and 76% respectively; Another example is the CRS data of level 3 or above (the lower the better, the same below), and the data of HR001 is 8%, which is higher than that of three listed competitors.

　　As a product of HR001 that has not been listed yet, this product of Hengrun Dasheng can only be late-comer and first-Mover, achieving overtaking in corners, and only with obvious technical advantages can it meet the fifth set of listing standards in science and technology innovation board. However, the core products of Hengrun Dasheng not only have no obvious technical advantages in the main indicators, but also lag behind in some indicators.

　　At present, Hengrun Dasheng’s HR001 products are still facing the challenges of many unlisted products, which can be described as "strong enemies around". According to the announcement, in addition to two listed products in China, there are nine kinds of drugs under study in phase II clinical trials and later research stages, including HR001. There are ADC and double antibody products for r/r B-ALL indications in China, and the clinical trial progress of four CAR-T products is faster than that of HR001；. Adcs and small molecule inhibitors for r/r MM indications have been approved for marketing in China, and three CAR-T products have been declared NDA.

　　Hengrun Dasheng’s HR003 products also have some problems that some indicators are behind competing products. For example, the best ORR of HR003 is 91%, which is lower than that of three competing products; The HR003 CR/sCR (the higher the better) index is 45%, which is lower than the two competing products; HR003 VGPR (the higher the better) index is 36%, which is lower than that of a competing product; The CRS of HR003 product above grade 3 is 9%, which is higher than that of three competing products; NT above Grade 3 is 5%, which is higher than that of two competing products.

　　It is worth mentioning that although some indicators of HR003 products, such as PR indicators, are higher than those of four competing products that have been listed, the HR003 products of Hengrun Dasheng are in the experimental stage after all, and the number of patients that can be evaluated is far lower than that of peers, and the stability of the data remains to be verified.

　　According to the data, HR001 and HR003 are equivalent to the estimated treatment costs of similar CAR-T products that have been listed or declared to be listed. CAR-T treatment costs include CAR-T product costs and other treatment costs, of which CAR-T product costs more than one million yuan, and other treatment costs are about 200,000 yuan, totaling about 1.2 million yuan. Moreover, two CAR-T products that have been listed in China are not included in the national medical insurance. The medical expenses of one million yuan are not included in medical insurance, which restricts the commercialization process and performance of Hengrun Dasheng to some extent.

　　In six years, there were only two invention patents, and the chief scientist left during the reporting period.

　　According to the prospectus, during the reporting period (2019-the first half of 2022), Hengrun Dasheng invested 84.3679 million yuan, 84.5953 million yuan, 160.3328 million yuan and 99.6431 million yuan respectively, totaling about 430 million yuan in three and a half years.

　　However, Hengrun Dasheng invested heavily in R&D, and only got two invention patents during the reporting period. What is more noteworthy is that among the 17 invention patents of Hengrun Dasheng, 15 were applied before April 21, 2017. In other words, the company only obtained two invention patents in the last six years.

　　The 17 invention patents of Hengrun Dasheng correspond to the company’s core technology platforms: antibody screening and verification platform and CAR structure design platform. There are only two invention patents in the last six years. Does it mean that the company’s core technology does not have obvious competitive advantage, or that the technology is more universal?

　　Among comparable companies in the same industry, 56 invention patents of Chipscreen were approved in 2021 and 2022. Junshi Bio has 17 invention patents approved in 2021 and 2022; In 2021 and 2022, a total of six invention patents of Shenzhou Cell were approved, all of which were much higher than the two patents of Hengrun Dasheng in six years.

　　Hengrun Dasheng not only failed to receive invention patents in recent years, but also lost many technicians. During the reporting period, the former chief scientist of the company, Hung Ming Hu (Hu Hongming), resigned, and the reason given by the company was the change of personal career planning. In addition to the former chief scientist, PIN WANG (Wang Pin), a member of the company’s former scientific advisory committee, also left his post in June 2021.

　　At present, the fastest-growing research projects of Hengrun Dasheng are HR001 for r/r B-NHL indications and HR003 for r/r MM indications, and NDA applications are expected to be submitted in the third quarter of 2023 and the third quarter of 2024 respectively.

　　However, according to public information disclosure, during the clinical research and development of HR001 and HR003, the competent authorities put forward opinions and suggestions on clinical trial schemes and prospects, and some opinions and suggestions were not adopted by the issuer. The regulatory authorities questioned whether there was significant uncertainty in the approval of new drugs.

　　Hengrun Dasheng admits that due to the uncertainties in the follow-up clinical trials and the review and approval of new drugs, it still takes some time for the company to submit its application for listing new drugs, and it needs to be approved by the regulatory authorities before listing. If the follow-up clinical trials and approval time of the drugs under research are significantly delayed compared with the company’s expectation, the drugs under research cannot be approved for new drugs, the approval contains significant restrictions, the conditional listing approval is revoked, or the drug listing approval is revoked due to safety problems or violations of laws and regulations during production and operation, etc., it will have a significant adverse impact on the company’s business operation.

　　Left-handed huge funds for financial management and right-handed fund-raising to supplement the flow.

　　According to the prospectus, Hengrundasheng plans to issue no more than 50 million new shares in this IPO, which is not less than 25% of the company’s total share capital after this issuance, and plans to raise 2.539 billion yuan. Simple calculation, the estimated value of Hengrun Dasheng’s IPO is about 10.1 billion yuan.

　　Of the 2.539 billion yuan raised by the company, 600 million yuan was used to supplement the working capital. However, the financial report shows that Hengrun Dasheng’s books are not "short of money".

　　At the end of each reporting period, the amount of trading financial assets of Hengrun Dasheng was RMB 20 million, RMB 110 million, RMB 533 million and RMB 422 million respectively, all of which were structured deposits purchased with temporarily idle funds.

　　Since there are so many idle funds in the company’s books, why should we use 600 million yuan to supplement the working capital? Is it necessary?

　　It is true that innovative pharmaceutical companies do need a lot of R&D investment, but of the 2.539 billion yuan that Hengrundasheng plans to raise, 1.337 billion yuan has been used for research and development projects of tumor immune cell therapy products. In other words, the 600 million yuan raised by Hengrun Dasheng to supplement working capital is not specially used for research and development, but may be used to supplement other working capital. However, the company’s books are not "not bad money", so why should we make a huge replenishment?