Text | Market Cap List, Author | Jia Lele, ed Jiaxin
There are also companies that are laying off employees.
Recently, a number of netizens who claimed to be internal employees of Remegen Biotechnology said on social platforms that the company is laying off employees on a large scale, and there are many ways to say the specific layoff plan, "involving multiple departments of R&D and production", "laying off 1,000 people", "planning for next year", etc.
Remegen denied the rumors and responded that the personnel needed for the company's strategic development were adjusted. The reply received by the Science and Technology Innovation Board Daily from Remegen Biotech is that "in fact, the company has sorted out the company's business since last year, and optimized the positions and personnel according to the combing. Optimization is only based on the needs of the work, there is no hard scale. ”
Although the rumors were denied, the current situation of Remegen Biotech made the layoffs seem very real.
As a star enterprise in the pharmaceutical industry, with its R&D capabilities in the self-exemption track and ADC track, in 2020 and 2022, Remegen was listed on the Hong Kong Stock Exchange and the Science and Technology Innovation Board.
Later, Remegen staged a multi-act plot such as breaking, hitting a new low and then hitting a new low, losses, tight cash flow, and layoffs. On September 16, Remegen's intraday share price fell to HK$10.2, down 93% from the high point of HK$149.8 in 2021, and after a sharp rise in the past few days, as of the close of trading on October 8, the stock price was only 11.4% of the high.
1. Without hematopoietic ability, lack of money becomes the biggest problem
Since the beginning of this year, "lack of money" has become the label of Remegen.
Although Remegen has repeatedly stated that the funds in hand are enough to support the capital needs of this year and next year, this question cannot be avoided in institutional research and individual investor Q&A.
Concerns about Remegen's cash flow have also caused the stock price to plummet, such as the flash crash at the beginning of the year and in July. On July 8 and July 9, the share price of Remegen Biotech Hong Kong stock fell by 18.7% and 20.27% respectively, and the shareholders at that time urgently threw out a plan to increase their holdings, but did not save the stock price.
From the fall in July to 924, Remegen basically did not rise decently.
How serious is Remegen's financial situation?
In the two listings, Remegen Biotech has raised 6.3 billion yuan, but it has already burned to the brim.
Taking 2023 as an example, Remegen has a net outflow of 1.5 billion yuan from business activities and a net outflow of 800 million yuan from investment activities.
As of June 30, 2024, Remegen's monetary funds were 676 million yuan, and there were two structured deposits totaling about 200 million yuan.
Compared with the end of 2023, the money on Remegen's account has not changed significantly.
The key is that borrowing behavior in the first half of 2024 is worrying.
At the end of 2023, Rongchang's short-term borrowings were only 284 million yuan, and by the end of June 2024, short-term borrowings increased to 930 million yuan, and long-term borrowings also increased from 841 million yuan to 1.342 billion yuan.
In other words, in half a year, Rongchang Biotech has a net increase of more than 1.1 billion yuan, the total liabilities have increased from 2.09 billion yuan to 3.09 billion yuan, and the asset-liability ratio has increased sharply from 37.8% to 53.7%.
Although Remegen has a certain amount of cash reserves, it is not enough to cover all the repayment needs of short-term borrowings, and there is a risk of tight liquidity. What's more, making innovative drugs is extremely expensive, and Rongchang needs more funds to support subsequent development.
At the performance meeting in April and July, Remegen said that it had bank credit of 4 billion yuan and more than 3 billion yuan respectively, which proved that there was still a way back for the capital problem.
However, in addition to repaying the borrowed money, interest is also paid.
In the first half of 2024, Remegen's interest expense will be 32 million yuan, nearly 40% higher than that of the whole year of 2023. Although the number is not high, it will also make the already loss-making Rongchang Biotech worse.
Taking money from the stock market is less expensive than borrowing money from a bank.
Soon after responding to the problem that the funds would not be tight in the short term and affecting the follow-up company's operations, Remegen launched a fixed increase, planning to raise 2.55 billion yuan, and then lowered the amount of funds raised to 1.95 billion yuan.
According to the situation of the seven projects under research disclosed in the interim report, it is estimated that there is still a funding gap of more than 2.1 billion yuan between the total investment and the cumulative investment.
So far, the fixed increase plan has not been passed.
Remegen's interim report said that if it is unable to make a profit or complete new financing in a certain period of time in the future, the company will be forced to postpone, reduce or cancel R&D projects, and the commercialization progress of the drug under development will be hindered will directly affect the ability to operate the business.
2. Where is the money spent? High R&D but low efficiency
Earlier, we mentioned that Remegen's IPO of more than 6 billion yuan is not enough to raise funds, and it will raise nearly 2 billion yuan through private placement, where is the money spent?
First, in the innovative pharmaceutical industry, the most unsavable expense must be R&D, and Remegen's R&D expenses are higher than revenue.
Remegen has three main R&D pipelines: autoimmune diseases, oncology and ophthalmology.
Tetacept (code name RC18, brand name Taiai ®) is mainly aimed at the treatment of autoimmune diseases, such as lupus erythematosus, and vedicitumab (code name RC48, brand name Edici) ® is the first original antibody-conjugate (ADC) drug developed by Remegen in China, which targets the HER2 protein on the surface of tumors and can accurately recognize and kill tumor cells.
In 2022 and 2023, Remegen's R&D expenditure will be 980 million yuan and 1.31 billion yuan, respectively, and will reach 800 million yuan in the first half of 2024, and all expenses will be 1.3 times, 1.2 times and 1.1 times of the operating income in the same period.
According to the research report of SPDB Securities, the first patient was enrolled in the two international phase III clinical trials of RC18 in the second half of the year, and it is conservatively predicted that the R&D expenses in the second half of the year will increase compared with the first half of the year.
Second, commercialization is inefficient.
Focusing on tetanercept and vedicitumab, Remegen has two commercialization teams.
In 2023, Remegen will have 1,185 sales personnel, and the average revenue of sales personnel will be less than 1 million yuan.
According to Wind data, 67 of the 70 listed companies in the biomedical industry sector of the Science and Technology Innovation Board can be calculated with the same caliber, and the per capita income of Remegen sales personnel is in the bottom 10.
If you calculate the per capita income and profit generation of all employees in 2023, Remegen will be ranked more than 50.
(Source: Wind Financial Terminal)
It can be seen that the commercialization efficiency of Remegen is average, and it is necessary to optimize business and personnel.
According to the interim report, Remegen's sales team has been further expanded, with a sales team of about 800 people and a sales team of about 600 people for vedicitumab, but the commercialization efficiency has been improved.
Third, "build a house".
At the time of the Hong Kong IPO, Remegen plans to invest 45% of the raised funds in the research and development of innovative drugs, and 25% of the funds for biomedical industrialization, while in the A-share IPO, the proportion of funds that Remegen plans to invest in innovative drugs will be reduced to 30%, and the funds for industrialization will be increased to 40%.
When there was no money, they began to raise funds to invest in innovative drugs.
Fang Jianmin, the soul of Remegen Biotech in terms of core technology, once mentioned that Remegen Biotech is achieving three transformations: from R&D company to commercialization stage, from small biotechnology company to large biopharmaceutical company, from local enterprise to international company.
The construction of a bio-base to support industrialization is consistent with the direction of "from a small biotech company to a large biopharmaceutical company", but in the stage of continuous losses and continuous blood loss, is it appropriate to choose this way?
Zhu Yi, the founder of Baili Tianheng, who is also an innovative drug company, believes that Biotech companies should not spend all their money on houses, and the venue can be rented at any time, but they can buy whatever they need for instruments and equipment, and they must buy the best.
Regarding the rhythm of spending money, Zhu Yi believes that some companies will spend money where they shouldn't spend it before clinical trials, and as a result, when it comes to the clinical stage, each clinical trial can only be opened slowly, and many opportunities are missed. If you are slow to do it clinically, you will waste all your time, and you will be one step slower. At this time, you have to open up, turn out all the resources and old books, and invest them all.
As of the end of June 2024, the proportion of Remegen's fixed assets plus projects under construction to total assets has reached 48.3%, Baili Tianheng is about 7%, and only 5 of the 70 listed companies in the biomedical industry on the Science and Technology Innovation Board are higher than Remegen.
(Source: Wind Financial Terminal)
If the turnover rate of fixed assets is used to judge whether it is comparable to the scale of income, Rongchang Biotech also ranks more than 50.
Just like preparing goods in advance for Double 11, if the future market demand prospect is optimistic, and preparing production capacity in advance is a rainy day, the question is what is the commercialization prospect of Remegen.
3. What are the prospects for commercialization?
The commercialization of tetanercept and vedicitumab both began in 2021, when both products entered the medical insurance, and the sales volume increased rapidly in the second year, with sales increasing by 17.8 times and 15.1 times respectively in 2022.
According to reports at the time, the price of Remegen's two new drugs dropped by about 70%, vedisitumab 60mg from the original 13,500 yuan to 3,800 yuan, and the price of tetanercept 80mg dropped from 2,586 yuan to 818.8 yuan, a decrease of 68.34%.
On the whole, the revenue of the two products in 2022 will be 738 million yuan, an increase of 462.19% compared with 2021.
In 2023, the sales volume of tetatercept and vedicitumab will increase by 59% and 15%, respectively, and the growth rate of vedicitumab is no longer impressive. In the first half of 2024, Rongchang Biotech did not have specific sales figures for the two drugs, and in terms of overall revenue, both products had a good momentum, with an increase of 75.6%.
What will happen to the commercialization of Remegen in the future is more controversial in the industry.
When it comes to RC18, the biggest controversy is the competitive landscape.
Remegen has been promoting RC18 to go overseas, SPDB International Securities said the progress was slower than expected, and CCB International issued a research report pointing out that market concerns are mainly focused on the overseas business development of the key drug RC18, that is, the lack of success in global rights licensing.
Studies believe that there is still a large gap in systemic lupus erythematosus (SLE) drugs, and the global market size is expected to grow at a consistent growth rate of 8.34%.
However, in terms of the competitive landscape, belimumab, a product United States the SLE market, failed to break through the $1 billion mark in 10 years of commercialization, and the annual sales of anilulumab in the second full commercialization were $280 million.
Moreover, there are now multiple innovative products in Phase III clinical trials in addition to RC18, and the competitive landscape is likely to become even worse.
Therefore, Remegen has been exploring other indications of RC18, such as myasthenia gravis, immunoglobulin A nephropathy, rheumatoid arthritis, etc.
Remegen's management pointed out that RC18 faces many challenges in going overseas, such as a variety of indications, multiple indications will involve many years of large-scale clinical trials, which increases the challenge of finding partners for going overseas, and for example, BD transactions usually involve the cooperation of multiple departments of overseas companies, especially multinational companies, and if multiple departments cannot reach a unified opinion, it will also cause BD transaction negotiations to stagnate.
Regarding RC48, some industry media believe that the third-generation ADC pipeline is in full bloom at home and abroad, and the technical competitiveness of Remegen's vedicitumab second-generation ADC will decline, and there is little room for expanding front-line treatments and new indications.
The innovative drug industry is like this, the high investment is certain, and the benefits are uncertain, but there are always people who have to do it. If you can't allocate resources and master the rhythm, you may change from a meat-eating role to a soup-drinking role, or even fall into a dilemma.