The vaccine producer is making a second attempt to list in Hong Kong, as its core HPV vaccine undergoes Phase 3 clinical trials

Key takeaways:

  • Jiangsu Recbio has filed a second IPO application to list in Hong Kong, hoping to become the first HPV vaccine maker in the market
  • The company was valued at around 9 billion yuan after its latest funding round

By Molly Wen

What started as a chance to participate in trials for an HPV 9-valent vaccine, which protects again cervical cancer, turned into something more like a lottery recently in the southern city of Shenzhen. People were lining up for that chance when a new round of the vaccines became available, with 580,000 women signing up for just 17,000 doses.

Many Chinese vaccine makers have recently started producing HPV vaccines, drawn by the market’s big promise. Jiangsu Recbio Technology Co. Ltd is one of those, with its core product, REC603, a recombinant HPV 9-valent vaccine that is currently in Phase 3 clinical trials. The company filed an IPO application to the Hong Kong Stock Exchange at the beginning of the year after failing to get approval for its first-time application last July.

Though none of its vaccines have been commercialized yet, the company is still popular with investors by virtue of its recombinant protein vaccine technology and a comprehensive reserve of HPV vaccine candidates. Its prospectus shows the company completed four funding rounds from March 2019 to June 2021, raising a total of 2.35 billion yuan ($370 million). It counts a number of all-star institutional investors among its backers, including Lake Bleu Capital, Sequoia Capital and Singapore’s Temasek. Its valuation surged to nearly 9 billion yuan by the time it finished its series C funding.

Jiangsu Recbio was established in 2012 and now owns a pipeline of 12 vaccine candidates, including ones for HPV, Covid-19, adult tuberculosis, hand, foot and mouth disease and influenzas. It boasts three technology platforms for new vaccine adjuvant development, protein engineering and immunity assessment and is one of the few companies in the world capable of developing adjuvants on its own.

Its HPV vaccine pipeline has advanced the fastest, offering 2-, 4- and 9-valent vaccines in the HPV category. The multiple offerings enable it to serve customers with different purchasing power and immunization needs. The core product, 9-valent vaccine REC603, has finished recruiting clinical trial volunteers, who will be administered with three doses within the first half of this year. The company plans to file with the Chinese National Medical Products Administration to market the drug in China in 2025.

Recurring HPV infection is the main cause of cervical cancer, and HPV vaccines are the only globally available means to prevent the cancer. The 2-valent option can prevent 70% of cervical cancer, while the 9-valent one can bring that rate up to 90%.

Intense competition

The Chinese market for HPV vaccines has immense potential. In 2017, GlaxoSmithKline (GSK.L) brought the first HPV 2-valent vaccine to market in China. Two years later saw the additional launch of a 4-valent vaccine and 9-valent vaccine by Merck & Co. (MRK.US) and the first Chinese-developed 2-valent vaccine from Beijing Wantai BioPharm (603392.SH).

A Frost & Sullivan study cited in the prospectus shows that China’s HPV vaccine market was valued at around 13.5 billion yuan in 2020 and is expected to reach 69 billion yuan by 2030, implying a compound annual growth rate of 17.7% over the period. Only one 9-valent vaccine has been approved by the health authority and is the most expensive HPV vaccine in China, but already accounts for more than 48.5% of the market. Such 9-valent vaccines are expected to dominate the HPV market by 2030.  

That said, the competition is cutthroat. China has 17 HPV vaccine candidates in clinical trials, including six 9-valent ones. Jiangsu Recbio’s candidate from that group is trailing behind Shanghai Bovax Biotechnology, whose 9-valent vaccine entered Phase 3 clinical trials in April 2020, targeting 20- to 45-year-old women. By comparison, Jiangsu Recbio did not start its clinical trials until June 2021, but is targeting a wider age group of 9- to 45-year-olds.

Besides HPV vaccines, the company has two Covid-19 vaccines under development. The first phase of clinical trials for the recombinant protein one called ReCov has been completed and preliminary data speaks to its effectiveness. It secured approval from the health authority in the Philippines to start its Phase 2 and 3 trials in the first quarter of this year, and plans to apply for emergency use authorization in 2022.

Highly valued

The Hong Kong stock market’s biotech segment has struggled lately, losing nearly 50% of its value after reaching a new high last June. Many recently listed stocks have fallen below their IPO prices. Three even fell on their trading debuts, including CANbridge Pharmaceuticals (1228.HK), which recently tumbled 27% on its first trading day.

Like many of its biotech peers, Jiangsu Recbio has yet to turn a profit. According to its prospectus, it lost 138 million yuan, 179 million yuan and 520 million yuan, respectively, in 2019, 2020 and the first nine months of 2021. The rising losses reflect the company’s growing R&D spending, which totaled 63.3 million yuan, 130 million yuan and 372 million yuan during the three periods, respectively.

So, what do investors think about such a company that still faces lots of uncertainty? Since no HPV vaccine stocks are listed in Hong Kong, we are left to compare it with HPV vaccine producers or distributors in the A-share market. Chongqing Zhifei (300122.SZ), Merck’s only Chinese distributor of HPV vaccines, is valued at around 170 billion yuan. Beijing Wantai Biological, which produces a 2-valent vaccine, is now worth 143 billion yuan. The two companies have price-to-sales (P/S) ratios of around 8 and 34 times, respectively.

Using their average P/S ratio of 21 times and projected earnings for Jiangsu Recbio last year, its estimated valuation is only around HK$800 million, which seems too low and fails to account for its future prospects.

Given the paucity of vaccine stocks in Hong Kong and Jiangsu Recbio’s potential status as the only one producing HPV vaccines, a valuation of more than HK$10 billion Hong Kong dollars seems quite possible when one considers it was already worth close to 9 billion yuan after the Series C funding round.

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