FAST NEWS: Drug Discovery Business Helps Viva Biotech Swing Back to Profit

The latest: Viva Biotech Holdings (1873.HK) released a positive profit forecast, saying it posted a net profit of 300 million yuan ($48.2 million) or more last year, reversing a loss of 380 million yuan in 2020.

Looking up: The company said its revenue jumped last year by more than 180% to 2 billion yuan year-over-year, citing bigger contributions from its drug discovery services and the expansion of its business scope from front-end drug discovery to also include the contract development and manufacturing organization (CDMO) business for third-party clients.

Take Note: Excluding fair value gains on the debt component of its convertible bonds, the company’s adjusted net profit rose by a more modest margin of 38% or more last year from 2020 to 350 million yuan or higher.

Digging Deeper: Founded in 2008, Viva Biotech provides drug discovery services to global biotech and pharmaceutical customers for preclinical innovation drug development, and went public in 2019 at an offer price of HK$4.41. Its stock rose to a historic high of HK$11.64 in June last year. But the shares fell in the second half of the year, following a broader pullback for Chinese pharmaceutical stocks. The company has bought back shares seven times since last September in a bid to support the price, and management also increased its shareholding. But the stock still fell 77% from its high and now trades 36.5% below its IPO price.

Market Reaction: The company’s shares initially rose 5.3% to HK$2.77 in early Monday trade and closed up by a milder 1.9% to HK$2.68 at the midday break.

Translation by Jony Ho

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