On September 14, Hualong Pharmaceutical, a domestic drug research and development company, was officially listed on the Hong Kong Stock Exchange today. The opening price on the first day was 8.28 Hong Kong dollars.
Hualing Pharmaceutical is headquartered in Shanghai. In June 2011, it was founded by founder Chen Li in collaboration with entrepreneurs in biomedical fields and well-known investment institutions. Hualing Pharmaceutical is currently developing Dorzagliatin, the world's first innovative oral drug for the treatment of type 2 diabetes.
It is reported that Dorzagliatin is a glucokinase activator (GKA) designed to control the gradual and degenerative properties of diabetes by restoring the homeostasis of glucose homeostasis in patients with type 2 diabetes. Data suggest that Dorzagliatin may be the first line of standard therapy for type 2 diabetes, either monotherapy or as a combination of currently approved antidiabetic drugs. This also indicates a huge market behind the drug.
According to Frost & Sullivan, there were 453 million people with diabetes worldwide in 2017, of which about 95% had diabetes or 435 million patients with type 2 diabetes. It is expected that by 2028, the number of patients with type 2 diabetes will increase to 561 million. China is currently the country with the largest number of patients with type 2 diabetes. There were 120 million patients in 2017. In addition, Frost & Sullivan estimates that 47.7% of Chinese patients with type 2 diabetes have not been diagnosed by 2017, but by 2028 this percentage will fall to 17.8%.
However, drug development is a costly project. At present, Hualing Pharmaceutical has not generated any income through goods or services, and only receives limited income from government subsidies and external investment. As of March 31, 2018, Hualing Pharmaceuticals had accumulated losses of more than 1.60 billion yuan. In terms of pharmaceutical manufacturing, the company does not have heavy assets such as production plants, and the drugs required for Phase III clinical trials are also commissioned by third parties.
Previously, the latest financing obtained by Hualing Pharmaceutical occurred in March this year. The accumulated amount of D and E round financing is US$117 million. Investors include Blue Pool Capital Limited, GIC Private Limited, Hangxin Global, Tonghe Yicheng, Ping An Innovation Investment Fund, and Mirae Asset Financial Group.
According to the IPO application submitted by Hualing Pharmaceutical, the company lost 362 million yuan in 2016 and lost 281 million in 2017. In the first quarter of 2018, the amount of loss of Hualing Pharmaceutical reached 322 million yuan. The analysis pointed out that this was mainly due to the launch of Phase III clinical trials in the third quarter of 2017. On the whole, from the first quarter of 2016 to 2018, Hualing Pharmaceuticals lost a total of nearly 1 billion yuan, of which R&D expenditure accounted for 25.26%.
In April this year, the Hong Kong Stock Exchange launched a new IPO policy to allow unprofitable biotech companies to go public in Hong Kong. After the implementation of the policy, the company was the first unprofitable biotech company to land on the Hong Kong Stock Exchange. This time, Hualing Medicine is the third non-profit pharmaceutical research and development company to go to Hong Kong after the Songli Pharmaceutical and Baekje Shenzhou.
The prospectus states that 150 million shares will be issued this time, and about 39% of the funds raised will be used to complete the phase III clinical trial of Dorzagliatin for monotherapy and metformin; 9% will be used for Dorzagliatin. Further research and development, including merger and differentiation tests for other applicable conditions; 27% will be used for commercialization of Dorzagliatin in China including marketing, sales, production, etc.; 11% will be used for further study of fixed-dose groups involving Dorzagliatin and personalized diabetes research 4% of the mGLUR5 project will be used to explore business opportunities in areas such as diabetes; 10% will be used as general working capital of the company.
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