Vaccine maker’s previous IPO bids on Shenzhen’s ChiNext board and in Hong Kong failed, but it is soldiering ahead with a new attempt in Hong Kong

Key takeaways:

  • Vaccine maker AIM has filed for an IPO in Hong Kong, following unsuccessful previous bids in Hong Kong and on Shenzhen’s ChiNext board
  • The company has three Covid vaccines under development, including an mRNA vaccine expected to hit the market in the fourth quarter

By Fai Pui

If at first you don’t succeed, try, try again. And again. And again. That’s the mantra these days at AIM Vaccine Co. Ltd., one of a handful of Chinese developers of Covid vaccines using mRNA technology, which is taking a new stab at an IPO in Hong Kong.

The road to its listing has been bumpy, to say the least. In 2020, AIM tried but failed to go public by listing A-shares on Shenzhen’s ChiNext board. Last June it shifted its sights to Hong Kong but was rejected less than a month later. The company and its A-list of underwriters, including Goldman Sachs, CICC, China Securities and Macquarie Group, will now have to live forever with the stigma of having their application returned without even being granted a preliminary hearing.

AIM tried again by filing for a Hong Kong IPO last September, and the application lapsed six months later. But instead of calling quits, it pulled itself together and filed one more time on April 8 with the same team of underwriters.

According to its IPO prospectus, AIM was China’s second biggest vaccine maker in terms of approved lot release volume last year, excluding Covid-19 vaccines, with 7.4% of the market. That was well behind the industry leader’s 35.5% share. Its current arsenal includes bacterial, viral, genetically modified and combination vaccines, as well as recent market darling mRNA vaccines.

The company has launched eight vaccines for treatment of six diseases or conditions including rabies, hepatitis A & B, mumps, hemorrhagic fever with renal syndrome and meningitis. It earned revenue of 1.57 billion yuan ($247 million) last year, down 4% from 2020 but a hefty 65% higher than 2019. The company attributed last year’s decline to the spread of Covid-19 variants starting late last July.

From black to red

The company’s profit profile has been somewhat erratic. Last year it lost 680 million yuan, reversing profits of 120 million yuan and 400 million yuan in the two previous years. It explained the swing into the red as the result of spending 950 million yuan on employee share and stock option grants, as well as a sharp rise in R&D spending to 310 million yuan last year from 160 million yuan in 2020.

Among the company’s eight vaccines in the market, the ones for rabies and hepatitis B are its biggest bread winners, both launched over 10 years ago. In the past three years, they combined to account for 84.2%, 90.2% and 93% of total revenue, showing the company’s growing reliance on them. But AIM is hardly the only one making these two vaccine types. At least eight companies offer rabies vaccines, and Shenzhen Kangtai Biological Products (300601.SH) has nearly 60% of the hepatitis B vaccine market. That leaves AIM without much of an edge for either of its two main products.

The company knows that continued dependence on the two vaccines will eventually lead to its own demise in such a competitive market, and has stepped up new product development to head off such an eventuality. Last year’s doubling in R&D spending put a strain on its cash pile, which totaled 650 million yuan by the end of the 2021, down 41.4% from a year earlier.

That heavy spending may be a driving factor behind the latest IPO attempt. The company said funds from the listing will be used to finance vaccine development, expand production capacity and build a better marketing team to bring new products to market and gain a step on the competition.

Its product pipeline is relatively full, with 22 vaccines under development targeting 13 diseases, five of those in clinical trials. The one that has attracted the greatest attention is an mRNA vaccine that is expected to launch in the fourth quarter to protect against Covid-19. Two of its other Covid vaccines that use deactivated virus and recombinant adenovirus vector techniques have not yet started clinical trials and are still a ways from commercialization.

Its mRNA vaccines in general are among those attracting the most attention. Apart from Covid-19, the company’s other mRNA vaccines target rabies and respiratory viruses, both self-developed. mRNA vaccines were a largely uncharted area for vaccine makers before the pandemic struck. Companies like Pfizer (PFE.US) and Moderna (RNA.US) have successfully developed such vaccines that are now being widely distributed around the world.

Race to market

The huge demand for mRNA Covid vaccines has attracted many Chinese companies, especially as the country currently has no such approved vaccines. In addition to AIM’s products, start-ups like Abon Biopharm and Stemirna Therapeutics are in the running. CSPC Pharmaceutical (1093.HK) and CanSino Biologics (6185.HK) have also successfully developed such vaccines that are about to be tested in clinical trials.

The race is still a toss-up over who will get to market first. Abon Biopharm’s ARCoV vaccine has completed its Phase 3 clinical trials with a positive safety record. Stemirna Therapeutics’ mRNA vaccine is undergoing a clinical trial in Laos and has been approved for first to third-stage clinical trials in Brazil.

Most vaccines administered in China over the past two years have been ones developed with deactivated viruses by Sinopharm (1099.HK) and Sinovac (SVA.US). Fosun Pharma (2196.HK; 600196.SH) is applying to bring Pfizer and BioNTech’s (BNTX.US) mRNA vaccine Comirnaty to China and start producing it there later this year. So, it’s far from certain whether AIM will be first to market if its vaccine meets the fourth quarter rollout date.

Vaccine stocks have a spotty record in Hong Kong. CanSino Biologics has fallen by more than 40% since the beginning of the year, giving it a price-to-sales (P/S) ratio of 5.1 times. CSPC Pharmaceutical has dipped by a milder 2% but still has a lower P/S ratio of 3.5 times.

Using those two numbers as benchmarks and AIM’s 2021 revenue for reference, the company might be valued at around HK$8.2 billion ($1.05 billion) if it succeeds in its latest listing attempt. But will its fall into the red turn off investors and sink its latest application? The company certainly hopes not, and is betting its latest application will finally be the shot in the arm that brings its shares to Hong Kong’s main board.

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