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Since the launch of the Science and Technology Innovation Board, the marketization of valuation has become more and more obvious, promoting new discoveries in the value of the biomedical industry, and also testing the insight of investment institutions into the future development of enterprises and their forward-looking judgment on corporate value
.
To invest is to invest in the future
.
As the first batch of biomedical professional investment institutions in China, Yifeng Capital has invested in more than 80 domestic and foreign high-quality enterprises since its establishment, including in-depth investment in well-known enterprises
such as Microchip Biotechnology, Frontier Biotechnology, Real Pharmaceutical, and Ascentage Pharmaceutical.
In terms of investment returns, the Yifeng 9 Comprehensive Fund issued in 2017 has invested in a total of 27 projects, of which 4 projects have been listed and 5 are in the process of listing queue, and the expected returns are good
.
It is worth noting that among the 24 domestic new drugs approved for the first time in 2021, 5 new drugs under Yifeng Capital Investment Project were approved, which made Yifeng Capital, which focuses on investment in the field of original drugs and high-end medical devices, attract much attention in the industry
.
In the column "Where Are Investors Going", Wang Kaifeng, partner of Yifeng Capital, shared the downturn trend of the pharmaceutical industry in the secondary market from the perspective of investors, and what kind of impact does it have on investment in the primary market.
And in the face of policies such as medical insurance control fees and volume procurement, where are the investment opportunities in the primary market? The following is the live broadcast content of Reliance Capital:
01 Opportunities and challenges in the primary market
Opportunities and challenges in the primary marketHow have VC/PE funds performed in recent years?
Through the preliminary research statistics of 400+ institutions and 1500+ funds, it is found that the median MOIC of funds with the first delivery time from 2011 to 2021 is 1 to 3 times, the median DPI is 0-1.
5, and the median DPI of funds in 2011 and 2012 exceeds 1.
0
.
At the same time, the vast majority of funds have not completed liquidation distribution, and the income gap between head and tail funds is highly differentiated
.
At the same time, innovative biotechnology has become the driving force for the growth of the domestic biomedical field, with biomedical financing (primary market) in 2021: a total of 947 cases, a year-on-year increase of 57.
1%, and a disclosed amount of 118.
875 billion yuan
.
Source: Yifeng Capital
When it comes to the challenges of the primary market, it is inevitable to talk about the current sluggish secondary market trend, which has a particularly
strong impact on primary market investment.
In the past year or so, both Hong Kong stocks and A-shares have been subject to relatively big challenges, and pharmaceutical stocks will inevitably be affected
.
Wang Kaifeng believes that the following factors have a greater impact on investment in the primary market:
Wang Kaifeng believes that the following factors have a greater impact on investment in the primary market:First, from the perspective of the broader market, the decline in market liquidity is relatively large
.
Affected by interest rate hikes, the epidemic, geopolitics and other factors, the liquidity of the entire market has declined, and investor sentiment is no longer high
.
Second, back to biomedical companies, the new crown epidemic has spawned some concepts, diagnostics, vaccines and other companies to go public.
Enthusiasm has also flocked to the field of
biopharmaceuticals.
However, for the long-term cycle of medicine, the clinical progress or full name of one or two years is not so fast, in this case, the correction of pharmaceutical stocks is also very important
.
Third, the explosion of Ipo
.
The development of biomedicine, starting from the 18A of Hong Kong stocks in 2018, the IPO outbreak has spawned some listed companies
.
But the commercial and clinical value of the pharmaceutical industry needs more time to verify
.
Whether it's retail investors, investors, or fund managers
.
It took a long time to find and wait, from the time of listing it was in phase 2, and after 2 years of listing, it was still in phase
2.
Issue 3 too
.
The sharp setback in market expectations, coupled with factors such as centralized procurement, especially brings a big question mark to the future market value of innovative drugs, which affects the market value
of enterprises.
The market is a process of big waves and a process
of reshaping the valuation system.
The pharmaceutical industry is an eternal sunrise industry
.
Long-term, strong demand is the underlying logic of this industry, which has not changed
.
Although the exit channels of the capital market fluctuate, they are constantly improving
.
First, the contradiction between demand and the status quo, the pharmaceutical industry is a strong demand industry
.
At this stage, with the aging of the market, lung cancer, tumors and other diseases, there are no particularly good drugs, and the market demand for drugs with good efficacy has increased
.
Second, in terms of policy, the state has issued various policies to guide, and the overall direction of the policy is to encourage innovation and guide innovation
.
Only new drugs in China, drugs with good efficacy come out, and they are effective
for medical insurance policies.
Third, the divergent characteristics of the pharmaceutical industry are also suitable for private equity funds to continue to invest
.
Divergent is explosive
.
Taking new energy vehicles as an example, this industry is a commercial industry chain
.
But the pharmaceutical industry is a region, a park
.
Dozens of pharmaceutical companies, as long as there are two or three successful enterprises, the value driven by them will be immeasurable
.
Fourth, the national biomedical industry is still in the start-up period
.
Returning to biomedical investment, 2017, 18, from the 13th Five-Year Plan period of investment in biomedicine has been a great increase
.
For the primary market, the current investment and financing changes are as follows:
For the primary market, the current investment and financing changes are as follows:Valuations returned to calm
.
There were indeed some bubbles
in previous valuations.
Now after the decline of the secondary market, the phenomenon of inversion of the primary and secondary markets is more serious
.
Now if companies want to raise capital, they must accept reality and lower valuations
.
Many companies now have the same valuation or lower
valuation as in the previous round of financing when they conduct a new round of financing.
Of course, valuations can also rise
if, in the process, the company makes significant clinical progress or achieves a milestone breakthrough.
The valuation of Chinese companies will be much
higher than that of the United States.
This is also the result of the industry boom of the past five years, but it is reasonable
for the market to return to calm now.
Some enterprises should focus on core varieties in R&D
.
Previously, investors emphasized more technology platforms and tracks, but from the perspective of pharmaceutical attributes, when the market was sluggish and funds were tight, everyone emphasized that enterprises should focus on core varieties, push core varieties to the clinic as soon as possible, push faster, and cash out commercial value as soon as possible, which is the status quo
.
.
The pace of IPOs should be slowed down
appropriately.
When the secondary market recovers, at the same time, enterprises should push the process of clinical semi-finished products, management research and development, etc.
, and consolidate the higher valuation in the early stage
.
appropriately.
Industry mergers and acquisitions will accelerate
.
Previously, it was more about product line cooperation, and there may be more overall company mergers and acquisitions
in the future.
.
In summary, a single company will face a challenge
when going public.
In particular, companies with lower incomes, and some medical device companies, which may be more suitable for listing after a merger in the primary market
.
In addition, companies that have already gone public, or those that have previously commercialized and have good cash flow, will face some pressure
to have a rich product pipeline.
For mature capital markets, listing exits are part of the market, and being acquired is also important
.
The future exit of pharmaceutical companies by mergers and acquisitions is also the exit path
that investment institutions mainly focus on.
02 How does Yifeng get a good target?
How does Yifeng get a good target?Compared with investment in other fields, investment in the pharmaceutical industry is more technological, with more emphasis on insight and forward-looking layout
.
Traditional corporate investment can be measured
by calculating indicators such as net profit.
However, companies with scientific and technological attributes, such as biomedicine, may be in the loss stage for many years before listing, and may still lose money
after listing.
This requires investment institutions to have a higher insight and foresight in the development of enterprises
.
In addition to looking at people, Yifeng pays more attention to product approval
.
For example, in 2021, 24 domestic new drugs were approved, of which 5 were invested by Yifeng, which made Yifeng proud
.
Yifeng is guided by in-depth industry research and conducts project screening
.
Every day, the team should look at multiple projects and do in-depth research, specific to the investment target, mainly from three dimensions to judge:
.
In-depth industry research-oriented project screening
.
The main manifestations are: the top investment research team takes the initiative to explore high-quality projects; Abundant resources of domestic and foreign investment banks and industry experts; Actively participate in the annual investment conference of China Pharmaceutical Promotion Association,
J.
P.
Morgan Global Health Investment Conference and other industry-heavy conferences
.
The whole link covers all stages of the project, mainly in the following aspects:
The whole link covers all stages of the project, mainly in the following aspects:Low-lying projects: Through in-depth research on mature targets and start-up projects on the same track, we can accurately explore low-lying projects that are undervalued by the market but have great potential, and lock in early-stage investment opportunities in a timely manner;
Low-lying projects:Top star projects: Based on the manager's rich industry resources and investment reputation in the field of medicine and biology, it has successfully seized the investment share of star projects among various investment institutions;
Head Star Project:Reinvestment in high-quality projects: continue to increase the number of high-quality invested projects, enhance the voice of managers on the board of directors, actively integrate upstream and downstream resources, and ensure the successful exit
of high-quality projects.
All-round post-investment services and support: for example, in the docking of industrial resources, help enterprises integrate resources, meet the many needs of enterprises, and empower the development of enterprises; In terms of human resources support, we use the advantages of years of deep industry cultivation to help enterprises introduce high-end talent resources; In terms of follow-up financing support, introduce new investors for the follow-up financing of enterprises, and continue to provide capital assistance for enterprises; In terms of enterprise management and development suggestions, closely follow up the development of enterprises, and give suggestions
in capital operation and enterprise development strategy.
In the investment of Yifeng Taihe Comprehensive Fund project, Microchip Biotech IPO on the Science and Technology Innovation Board in August 2019, becoming the first biopharmaceutical stock on the Science and Technology Innovation Board, with a market value of 39 billion yuan on the first day; China's first original anti-tumor new drug with global rights and interests, cidarbenamide, has entered the national medical insurance
.
Ascentage Pharma IPO in October 2019, with a market value of RMB7.
786 billion on the first day, has successfully developed 8 new drug projects into phase I-II international clinical studies, all of which are original Class 1.
1 new drugs
.
Frontier Biotech IPO on the Science and Technology Innovation Board on October 28, 2020, with a market value of 10.
8 billion yuan on the first day; In May 2018, it successfully launched the world's first long-acting anti-AIDS new drug Avvitec
.
Kaishi Biotech is a high-tech enterprise providing customized solutions for in vitro diagnostic instruments and consumables; Through the CDMO mode, in vitro diagnostic reagent manufacturers are provided with professional instruments and consumables research and development, design transformation, registration, precision manufacturing and other services and products
Yifeng Phase 9 Comprehensive Fund, the "Central Law" provides a theoretical basis
for gene therapy methods.
Gene therapy starts from DNA, the root of protein synthesis, and changes the transmission of genetic information by regulating DNA, thereby changing the traits of proteins, and realizing the treatment of diseases from the root without facing traditional drugs at the protein level
The dilemma
of "undruggable" targets.
Heyuan Biotech is a representative investment case
driven by research.
Since 2017, Yifeng has focused on the field of gene therapy, and after research, it was found that from the technical end to the product side is not so mature, so the team will target the enterprises that master the early research and development technology, and when screening to the meta-organism, it is very distinctive in terms of full coverage of mainstream viruses, in addition, it is the only enterprise in China that has the ability to ferment in three methods of suspension/microcarrier/adherent, and the one-time large-scale production process capacity is 200-500L
vs
Peer 50-200L; The quality control system is strictly higher than the international quality standards, and the only two companies that participate in the establishment of gene therapy product quality standards by the Central Inspection Institute; > 3,000 scientific research customers > 100 pilot and clinical production batches of products into clinical trials
in China, the United States and Australia.
In 2019 and 2020, Yifeng made two rounds of investment
in Heyuan Biotechnology.
In March this year, Heyuan Biotech was listed on the Science and Technology Innovation Board, with a 70% increase on the first day, and two rounds of investment, relying on the floating profit of about eight to nine times
.
Real Bio, an innovative pharmaceutical company with two consecutive rounds of heavy investment in Yifeng Capital, has developed China's first small molecule new crown oral drug, and its differentiation meets clinical needs
.
In 2020, after coming into contact with real organisms, Yifeng did in-depth research and found that it was at the node
of drug innovation at that time.
In November, Yifeng Capital exclusively led the Series A financing of Real Bio; In 2021, Azvudine was approved for marketing (anti-AIDS); In August of the same year, Yifeng Capital once again led the $100 million Series B financing of Real Bio; In July 2022, azvudine was approved for marketing for anti-new crown indications; In August, Real Bio officially submitted its IPO application
to the Hong Kong Stock Exchange.
Through the above cases, we also summarize the investment philosophy: cooperative team, the right thing, the right time, the right price
.
Because of the industry characteristics of biomedicine, investment judgments
need to be made based on in-depth industry research.
So we emphasize professionalism
.
Since its establishment, Yifeng has only invested in original drugs and medical devices
.
At present, 70%~80% of the funds are invested in medicine, and 20%~30% are invested in medical equipment
.
Investment must ultimately achieve capital appreciation, and the most basic thing is to bring returns to investors
.
The above is our investment logic and values
.
