For the winter samples of innovative pharmaceutical companies, InnoCare took out 3 billion yuan to buy financial management

Interface News Reporter | Tang Zhuoya

Interface News Editor | Xie Xin

When some innovative pharmaceutical companies were worried about the shortage of cash flow under the cold winter of innovative drugs, InnoCare announced that it would spend 3 billion yuan to buy wealth management products.

On June 26, InnoCare announced that it planned to use idle own funds of no more than 3 billion yuan for cash management and purchase low-risk investment products with high security and good liquidity without affecting normal operation and capital security.

In the secondary market, InnoCare's share price rose for two consecutive days. At the close of trading on June 28, InnoCare reported 8.11 yuan per share, up 3.05%.

This is the second time that InnoCare has used cash to buy wealth management products in the first half of this year. On May 31, the Board of Directors of InnoCare approved that the Company would use up to RMB1 billion of temporarily idle raised funds for cash management under the premise of ensuring that the construction of investment projects and the use of raised funds would not be affected, and that risks should be effectively controlled, for the purchase of low-risk investment products with high security and good liquidity.

According to the bulletin board of InnoCare, it will take out no more than 800 million yuan of temporarily idle raised funds for cash management in 2022 and 2023 respectively. According to the financial report, in 2022, InnoCare used the temporarily idle raised funds for cash management and the total investment income obtained from call deposits and agreement deposits of 7.6079 million yuan, and the total investment income in 2023 will be 37.1333 million yuan. This year, InnoCare has significantly increased the amount spent on wealth management.

In reply to the Science and Technology Innovation Board Daily, InnoCare staff said that the significant increase in the (investment) quota was mainly affected by the change in bank interest rates, "In the past, the bank's fixed deposit interest rate was relatively high, and the company could also obtain good returns by depositing the relevant funds in the bank account." However, this month, the bank lowered the interest rate, and it is not very cost-effective for the company to continue to keep the funds in the bank, so that more idle funds can be used for low-risk bank financial management", said the above-mentioned staff member This move will not affect the promotion of the pipeline under research.

InnoCare's 2022 and 2023 financial reports show that InnoCare's monetary funds are 8.743 billion yuan and 8.287 billion yuan respectively, and cash and cash equivalents are 4.180 billion yuan and 4.203 billion yuan respectively. Even in the first quarter of 2024, InnoCare still has 8.202 billion yuan of monetary funds and 4.616 billion yuan of cash and cash equivalents on its books.

However, in terms of cash reserves, InnoCare is not the king. According to the statistics of Yaozhi Toutiao, as of the end of 2023, the total cash (monetary funds) of 72 biotech (biotechnology) companies was 129.5 billion yuan, a decrease from 2022. Among them, there are only three companies with cash reserves of more than 10 billion yuan: BeiGene, GenScript Biologics and Innovent Biologics; There are 4 companies with cash reserves between 30 and 10 billion; There are 29 enterprises with cash reserves between 1 billion and 3 billion yuan; There are 16 enterprises with cash reserves of 5-1 billion. Biotech's cash reserves are seriously polarized, and in 2023, there are still 20 Biotech companies with cash reserves of less than 500 million, and the cash flow of Yongtai Biotech and Dizhe Pharmaceutical is even less than 100 million.

In March 2023, InnoCare raised about HK$2.24 billion (approximately RMB2.085 billion) when it was listed on the Hong Kong Stock Exchange, and in September 2022, InnoCare raised a total of RMB2.919 billion when it was listed on the SSE STAR Market. Since then, InnoCare has achieved "A+H" dual listing, and has also raised a large amount of funds through two IPOs.

Although InnoCare has abundant cash flow, it has to be converted into products in order to be substantially competitive. At present, InnoCare's BTK inhibitor orelabrutinib has been commercialized, tafasitamab (tanxitumab) has been approved in Hong Kong, China, and approved for use as an imported drug in the Greater Bay Area and Boao Super Hospital, and 13 other products are in phase I/II/III clinical trials.

In other words, the only product that InnoCare has achieved large-scale commercialization is orelabrutinib. In 2021, 2022 and 2023, orelabrutinib contributed revenue of RMB215 million, RMB566 million and RMB671 million respectively. However, compared to BeiGene's zanubrutinib, orelabrutinib pales in comparison. In 2023, the global sales of zanubrutinib will reach US$1.3 billion, becoming the first domestic "billion-dollar molecule".

The reason for the rapid growth of zanubrutinib is that it has gone overseas and expanded its indications. In January 2023, zanubrutinib was approved in the U.S. for the treatment of relapsed/refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (r/r CLL/SLL), and a head-to-head Phase III study with ibrutinib was initiated in this indication with superior results. In March 2024, zanubrutinib also added a new indication in the United States and was approved in combination with obinutuzumab for the treatment of adult patients with r/r follicular lymphoma (FL).

In contrast, orelabrutinib's road to sea is not so smooth. In February 2023, Biogen returned the exclusive global rights to orelabrutinib, and orelabrutinib failed to go overseas for the time being, and InnoCare's stock price plummeted. In terms of expanded indications, orelabrutinib was approved by the NMPA for the treatment of relapsed or refractory MZL (marginal zone lymphoma) in April last year, becoming the first and only BTK inhibitor approved for this indication in China so far, and the third indication of orelabrutinib.

At present, in InnoCare's R&D pipeline, orelabrutinib still has 4 clinical trials related to hematologic malignancies and 4 clinical trials related to autoimmune diseases.

In addition, it is worth noting that although InnoCare now has a large amount of cash on its books, it has not yet achieved profitability since its listing. From 2020 to 2023 and the first quarter of 2024, InnoCare's net losses were 392 million yuan, 66.7 million yuan, 894 million yuan, 646 million yuan and 142 million yuan respectively. In terms of R&D expenses, InnoCare spent RMB423 million, RMB733 million, RMB649 million, RMB757 million and RMB178 million respectively in the same period.