"electric eel finance" article/Gao Wei

following the reply from Wuhan heyuan biotechnology co., ltd. (hereinafter referred to as "heyuan biology") and the sponsor on the second round of audit inquiry letter on September 6, the IPO audit status still shows "no meeting". The proposed fund-raising is 3.502 billion yuan.

"electric eel finance" after investigation and research found that the company's IPO prospectus there are still many doubts, especially how to reverse the decline in performance? R & D strength is weak and the letter problem is more prominent. For the confirmation letter of this network, Heyuan Biology chose to keep silent.

Performance decline trend

financial data show that the revenue of Heyuan Bio in 2019, 2020, 2021 and 2022 in June was 10.25 million yuan, 21.5659 million yuan, 25.5181 million yuan and 6.0496 million yuan respectively; the corresponding net profit of the same period was -49.9357 million yuan, -53.3516 million yuan, -0.134 billion yuan and -58.2987 million yuan respectively.

Heyuan Bio adopts the fifth listing standard of Article 22 of the "Shanghai Stock Exchange Science and Technology Innovation Board Stock Issuance and Listing Review Rules": the estimated market value is not less than RMB 4 billion, and the main business or products need to be approved by the relevant state departments Approved, the market space is large, and phased results have been achieved. Pharmaceutical industry enterprises need at least one core product to be approved to carry out phase II clinical trials, and other enterprises that meet the positioning of the board need to have obvious technical advantages and meet the corresponding conditions.

the proposed fund-raising for plant source recombinant human serum albumin industrialization base construction projects, new drug research and development projects, supplementary working capital.

"electric eel finance and economics" noted that none of the seven currently under research products of heyuan biology has entered clinical phase iii, let alone commercial sales. Public information shows that not only the technical route of "rice seed blood" has not been commercialized in the field of human drugs, but also recombinant human serum albumin. It is still doubtful whether the products of Heyuan Bio can be commercialized.

Since its establishment more than ten years ago, there has been no commercial sales of products and continuous investment in research and development, which has made Heyuan Bio "cannot make ends meet" for many years, with huge losses on its books to be filled, and it relies on continuous financing for "blood transfusion". After multiple rounds of financing, the equity structure of Heyuan Bio is very fragmented and the stability of the controlling interest has declined. As of the end of June 2022, the company's total assets were 1.1 billion yuan, but it plans to raise 3.5 billion yuan, corresponding to an overall valuation of 13.996 billion yuan, which is 1.71 times higher than its financing valuation in February 2022.

R & D strength is weak

Heyuan Bio is an innovative biomedical company with the world's leading plant bioreactor technology platform. The company's core product HY1001 has completed Phase II clinical studies and is expected to start Phase III clinical studies in the first quarter of 2023; HY1002 is undergoing Phase II clinical trials; HY1003 has been approved by the US FDA to enter the clinical phase and is undergoing Phase I clinical trials. The company has four other drugs in the pre-clinical development stage.

Heyuan biological core product under research is plant-derived recombinant human serum albumin, which is dedicated to extracting human serum albumin from rice. The prospectus shows that the company has been operating for more than ten years, and no products under research have been successfully listed. Of the 7 drugs currently in research, 3 are in clinical research and 4 are in preclinical research. Among them, the core product with the fastest progress in research and development, plant-derived recombinant human serum albumin, is expected to enter clinical Phase III trials in 2023.

The company said that at present, the clinical application of human serum albumin mainly comes from plasma extraction, there is no recombinant human serum albumin on the market, and the research and development technology route of recombinant human serum albumin drugs has not been commercialized. At the same time, there are no human drugs produced by rice endosperm cell bioreactor expression system in the world, and the rice endosperm cell bioreactor expression system has not been commercialized in the field of human drugs. It can be seen that the commercialization of the "plant-derived recombinant human serum albumin project" is very difficult, and it is still doubtful whether the project will eventually land.

According to the disclosure of the prospectus, from the current point of view, the company and comparable companies in the same industry still have some room for improvement in research and development. During the reporting period (2020-the first half of 2022), the Company's research and development expenses were $45.0519 million, $75.2102 million and $47.962 million, respectively. The percentage of operating income in the consolidated financial statements was 294.73 per cent, 208.90 per cent and 339.53 per cent, respectively. In terms of research and development costs, the average comparable peer value is 0.936 billion yuan, the average comparable peer value is 0.075 billion yuan, and the average comparable peer value of technology and research and development personnel at the end of 2021 is 583.25 people, and the average comparable peer value is 63 people. The difference between each other is not small.

The letter is covered with omissions

According to the prospectus, Heyuan Bio selected five listed companies as comparable companies, namely Shenzhou Cell (688520), Baiotai (688177), Junshi Bio (688180), Maiwei Bio (688062) and Rongchang Bio (688331). The peer flow ratio disclosed in the prospectus differs from the data of flush iFind, which is reflected in the flow ratio data of Rongchang Bio.

The prospectus shows that from 2019 to 2021, Rongchang Bio's current ratio (times) is 0.16, 6.90, and 3.73, respectively, while the information on Flush Shun iFind shows that from 2019 to 2021, Rongchang Bio's current ratio (times) is 0.16, 7.00, and 3.76, respectively.

Rongchang Bio Hong Kong (09995) Annual Report discloses that from 2020 to 2021, Rongchang Bio's current ratio (times) is 6.90 and 3.73. On the issue of information differences between comparable companies in the same industry, Heyuan Bio replied that the prospectus uses financial data from Hong Kong stocks, which is slightly different from the-share data, but does not affect substantive judgment.

According to the prospectus, during the reporting period, the research and development expenses of Heyuan Bio accounted for 339.53 percent, 208.90 percent, 294.73 percent and 792.81 percent of operating income, respectively. The Prospectus of Heyuan Bio does not disclose the proportion of research and development expenses of the peers, but only discloses the main expression system of the peers, the listing or the main research products.

in addition, when introducing peer data, heyuan biology only discloses the peer's current ratio, quick ratio, asset-liability ratio, depreciation life of fixed assets, main expression system, listing or main research products. in addition, heyuan biology does not disclose the peer's sales expenses, management expenses, financial expenses, etc. According to the "Guidelines for the Content and Format of Information Disclosure by Companies Offering Securities to the Public No. 41-Prospectus of Science and Technology Innovation Board Companies" (hereinafter referred to as: Document No. 41) issued by the China Securities Regulatory Commission, it should disclose: sales expenses, management expenses, and research and development expenses during the reporting period The main composition and reasons for changes in the cost level during the period; if there are significant differences compared with comparable companies in the same industry, the reasons should be analyzed in the light of business characteristics and business model.

It is clear that the sales expense ratio, management expense ratio, research and development expense ratio and financial expense ratio of Heyuan Bio all differ to varying degrees from the average of comparable companies. For comparable peer data disclosure issues, Heyuan Bio did not give an explanation of the reply, the emergence of such a letter cover omission should not, Haitong Securities sponsorship work or the existence of default.

Electric Eel Finance will continue to focus on the progress of the bio-IPO.