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Huahao Zhongtian Pharmaceutical (02563.HK)

Subscription Period: October 23 – October 28, 09:30 (HKT)

Offering Price Range: HKD 16 to HKD 22 per share

Minimum Investment: HKD 4,444.38 (200 shares per lot)

Joint Sponsors: CCB International and China Securities International

Expected Listing Date: October 31

Huahao Zhongtian Pharmaceutical (02563.HK) commenced its IPO subscription on October 23, which will remain open until October 28. The company plans to issue 14.588 million H shares, with 10% allocated for the public offering in Hong Kong. The offering price per share is set between HKD 16 and HKD 22, with the maximum fundraising target estimated at approximately HKD 320 million. Each lot consists of 200 shares, requiring a minimum investment of around HKD 4,444.4. The company is expected to be listed on the Hong Kong Stock Exchange on October 31, with CCB International and China Securities International serving as joint sponsors.

Company Overview

Founded in 2002 by Dr. Tang Li and Dr. Qiu Rongguo, Huahao Zhongtian Pharmaceutical is a biopharmaceutical company dedicated to the development of innovative oncology therapies. According to its IPO prospectus, the company has built three core technology platforms focused on discovering new drugs derived from microbial metabolites. Its current portfolio includes one commercialized product and 19 candidates under development.The company’s flagship product, Utidelone for Injection, received approval from the National Medical Products Administration (NMPA) in 2021 for the treatment of relapsed or metastatic advanced breast cancer. Subsequently, in January 2023, the drug was added to the 2022 National Reimbursement Drug List, further enhancing its market accessibility.

Huahao Zhongtian’s product pipeline addresses a broad range of cancer indications, including advanced breast cancer, advanced non-small cell lung cancer (NSCLC), neoadjuvant breast cancer therapy, gastric cancer, esophageal cancer, brain metastases from breast or lung cancer, gliomas, and other solid tumors. Utidelone demonstrates a broad anti-tumor spectrum, with superior efficacy compared to paclitaxel across several common cancers. Notably, it also offers significant therapeutic benefits against multidrug-resistant tumors. Additionally, the company is developing an oral formulation of the drug, known as Utidelone Capsules, which is currently undergoing Phase II/III clinical trials.

Financial Performance

The company’s revenue has exhibited steady growth, increasing from CNY 32.82 million in 2022 to CNY 66.64 million in 2023. However, despite the revenue growth, Huahao Zhongtian reported substantial operating losses, amounting to CNY 160 million in 2022 and CNY 190 million in 2023. These losses are primarily attributed to high research and development (R&D) expenses, reflecting the company’s commitment to advancing its product pipeline. In 2023, Huahao Zhongtian allocated approximately CNY 130 million to R&D, which accounted for 66.72% of total losses.

In the first five months of 2024, the company reported CNY 30 million in revenue, while net losses totaled CNY 60 million. During the same period, R&D expenses constituted 76.28% of total losses, further demonstrating the company’s ongoing focus on innovation and drug development.

The net proceeds from the IPO will be allocated as follows: 44.9% will be used to fund ongoing and planned clinical trials of the core product; 38.9% will support ongoing and planned clinical trials and preclinical research of non-core products, as well as investigator-initiated trials (IITs) related to the core product. Additionally, 3% will be allocated to strengthening the company’s domestic commercialization efforts and establishing a global marketing network. Furthermore, 3.2% will be used to expand production capacity, and the remaining 10% will be reserved for working capital and general corporate purposes.

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