Li Ka-shing’s last battle

R&D is not as easy as playing capital.

Three new drugs were approved only 20 years after its establishment, and about 400 million US dollars have been burned in the past three years.

With the launch of Hutchison Pharmaceuticals in Hong Kong stocks, Li Ka-shing’s medical empire has gradually surfaced, but can this really help him recreate the myth of wealth?

01 The value has gone up again!

Li Ka-shing has been rich for too long.

Since 1979, Hong Kong’s richest man first landed on the throne, 40 years, Li Ka-shing swept a number of “richest” title, the richest man in China, Asia’s richest man, and even won the richest Chinese in more than a decade, writing several unclear wealth myth.

Although the momentum has declined in recent years, in the “2021 Hurun Global Rich List” announced in March this year, Li Ka-shing is still ranked 43rd in the world with a net worth of 220 billion yuan, making him the richest man in Hong Kong.

With the listing of Hutchison Medicine, Li Ka-shing’s value has risen again.

On June 30, Hutchison Pharmaceuticals landed in Hong Kong stocks, and rose by 110% on the first day, with a total market value of more than 70 billion Hong Kong dollars. In sharp contrast, a number of local innovative pharmaceutical companies have broken their shares before landing in Hong Kong stocks, and even the star company BeiGene has not been spared.

The history of Hutchison Medicine can be traced back to 2000. That year, Li Ka-shing’s Hutchison Whampoa set up the Yangtze and Huang in Hong Kong, a wholly-owned Chinese Medicine Science and Technology (short and yellow), and later registered in the Cayman Islands. This is also the foundation of Hutchison Medicine.

Since 2001, Hutchison Whampoa has established pharmaceutical and health care products companies through joint ventures, sole proprietorship, etc., responsible for the production, marketing and distribution of related products. The part that focuses on the research and development of oncology drugs/immune drugs is the subsidiary Hutchison Whampoa Pharmaceuticals (Hutchison Whampoa for short) established in 2002. Its business positioning is to focus on the research and development of innovative drugs, supplemented by the sales of patent drugs.

The listing, the nuclear medicine and yellow of the entire system , Taste brand, replaced the original and Chi-Med.

Innovative drugs are undoubtedly the biggest gimmick that attracts investors to pursue the listing of Hutchison Medicine. In fact, Li Ka-shing’s initial positioning of Hutchison was “innovative botanical medicine”, and many of its layouts were developed around the Chinese medicine industry.

For example, Hutchison Whampoa’s first pharmaceutical company in the Mainland was a joint investment of 220 million yuan with Shanghai Medicinal Materials Co., Ltd., a subsidiary of Shanghai Pharmaceutical Group, to transform the Shanghai No. 1 Chinese Medicine Manufacturing Factory at the time, which later became Shanghai Hutchison Pharmaceutical Co., Ltd.

The original Musk Baoxin Pills of the old pharmaceutical factory have contributed hundreds of millions of yuan in sales each year and are still one of the company’s main products. The prospectus shows that the sales of Shexiang Baoxin Pills produced by Shanghai Hutchison Pharmaceuticals accounted for approximately 85%, 88% and 90% of the total revenue in 2018, 2019, and 2020, respectively.

In 2005, Hutchison has a joint venture with Guangzhou Pharmaceutical as Li Bai Yunshan and yellow, mainly producing and selling its own patented non-prescription products.

According to the database of the State Food and Drug Administration, it contains a large number of proprietary Chinese medicine products, such as Kouyanqing Granules and Naoxinqing Tablets, all of which are exclusive varieties.

Li Ka-shing's last battle

▲The source of Hutchison Medicine’s listed and research products : official website of Hutchison Medicine 

In 2009, Baiyunshan and Huang had gone from an annual loss of nearly 50 million yuan to a traditional Chinese medicine company with sales of nearly 1 billion yuan, with an average annual growth rate of more than 30%. However, at the beginning of this year, Hutchison Medicine sold the entire equity of the joint venture to Telford Capital for US$169 million.

Hutchison Pharm was able to turn to innovative drugs thanks to Du Ying, who later founded Zai Lab. In 2001, she accepted Li Ka-shing’s invitation and returned to China from Pfizer to develop. After several years of hard work, she finally determined the research and development direction of small molecule targeted drugs.

Du Ying, who was the president of Hutchison Pharmaceuticals at the time, was full of confidence, saying that she would “take a path that no one else has traveled” in the field of innovative Chinese medicines.

After that, she took the lead in cooperating with multinational pharmaceutical companies such as AstraZeneca and Eli Lilly , and facilitated Hutchison Whampoa’s listing and financing on the Alternative Investment Market (AIM) of the London Stock Exchange in 2006. Until she left in 2012, Du Ying can be said to have put Hutchison on the innovative drug track and sent her off again.

16 years after its establishment (2018), Hutchison Medicine’s first new drug, Fruquintinib, was approved for marketing. By 2021, Hutchison Medicine will have 3 new drugs approved for marketing and 10 pipelines under development. Among them, Fruquintinib entered the National Medical Insurance Catalogue in 2019, and its sales volume increased by more than 90% that year.

In December 2020, Hutchison Pharmaceuticals started the construction of a Shanghai innovative drug production base in Shanghai Zhangjiang Hi-tech Park. After the completion of the first phase of the project, the annual production capacity will reach 250 million tablets and 550 million capsules, which is 200 to 900 times the sales volume of fruquintinib capsules in 2020. The second phase of the park will also be extended to the field of macromolecular compounds.

Judging from this layout, He Huang Medicine is gearing up for it, and it is quite determined to do a big job in the Chinese pharmaceutical market.

02 There are many wealthy “precious sons”

Hutchison Medicine is not the only medical “treasure son” on Li Ka-shing’s business map.

As a matter of fact, while Li Ka-shing has frequently entered the pharmaceutical field in the Mainland, Yangtze River Life Technology is also being established and will soon be split and listed on the Hong Kong GEM.

This enterprise by the eldest son of Li Ka-shing Victor “Trader”, the main business is biotechnology product development, commercialization, marketing and sales, Cheung Kong holds 45.31% stake; Jia Li Cheng-based equity ratio will be 29.50% gold.

According to the prospectus, the products of Changjiang Life Science and Technology at that time covered the five major fields of ecological agriculture (fertilizers, animal feed additives), environmental governance, medicine, health food, and skin care products, but only the fertilizer field obtained patents.

In the medical field, the company said it is drafting 50 patent applications and selecting some products for preliminary human testing in China. It can be roughly restored from the follow-up announcements and reports that “some products” include the theory of AIDS treatment programs.

Li Zeju once stated that the company is conducting clinical application trials with Union Hospital and You’an Hospital. Preliminary data has confirmed the theory, including obvious improvement or complete disappearance of symptoms in 70% to 80% of patients, and a certain degree of recovery in immune function .

After listing, Changjiang Life Technology has changed its share capital structure several times and increased the number of shares issued. Especially this time in May 2006, stimulated by the news of its issuance of stocks, biochemical stocks also received a round of speculation in Hong Kong stocks.

There was a company whose stock price soared by nearly 20% just because its name was similar to that of Yangtze River Life Technology; another company of the same kind saw its stock price soar by more than 100% in one day.

By 2008, because the main board helped to enhance the status of the group and increase the trading volume of shares, Yangtze River Life Technology withdrew from the Growth Enterprise Market and officially landed on the main board. 9,611,072,400 shares had been issued, an increase from the 6,407,000,000 shares initially sold in 2002. Up 50%.

In 2012, Yangtze River Life Technology split the research and development business of cancer immunotherapy solutions separately and listed on NASDAQ in the United States. The dismantling of part of Polynoma’s melanoma vaccine is also one of the core scientific research projects of Yangtze River Life Science and Technology.

Melanoma is known as the “king of cancer” and is the peak of many anti-cancer drug products. Merck’s cancer immune drug K drug once reported that the former president of the United States used the drug in combination with radiotherapy to cure melanoma that has metastasized to the brain and liver, and its share price directly doubled.

Yangtze River Life Technology has also been favored by capital repeatedly for its melanoma vaccine. In the past ten years, every time a company announced that its related research and development had progressed, or even announced data, it would trigger a carnival in the stock market.

In November 2019, Yangtze River Life Technology issued an announcement stating that it has made important progress in researching melanoma antigen vaccines, and its relevant clinical data will be announced. Within two days, the company’s stock rose by 300%.

Li Ka-shing's last battle

Since then, although the market has calmed down, there have been two rises in 2020: one was when the company announced that it would show clinical data on vaccines, and the stock price rose by 7%; the other was when the product obtained the FDA (Food and Drug Administration) fast track qualification , Causing the stock price to rise by about 20%.

In the past 20 years, despite frequent capital operations, Yangtze River Life Technology has been lacklustre in the field of research and development.

Judging from the company’s revenue, the current annual income of nearly 5 billion Hong Kong dollars is mainly derived from agricultural-related businesses and health care products-vitamins, immune products, etc., which are basically the product lines acquired later.

03 “Longevity Dream”

Whether it is Hutchison Medicine or Yangtze River Life Technology, they are just chess pieces in Li Ka-shing’s medicine territory.

Why does Li Ka-shing lay out the medical field? There are also many rumors in the market, the most interesting of which is to realize his “dream of immortality”.

As early as 1999, Li Ka-shing and Hong Kong New World Group Chairman Zheng Yutong jointly invested 40 billion yuan to build a Chinese medicine port in Hong Kong.

According to the official vision, this port integrates production, trade, research, consultation and training of Chinese medicine talents, and will become an international Chinese medicine center in the future. Hong Kong has also passed a series of laws and regulations such as the “Chinese Medicine Ordinance” through the Legislative Council, and it is ambitious to achieve great development in the field of Chinese medicine.

At the same time, Hutchison has accelerated the pace of joint ventures with time-honored brands. In addition to Hutchison Whampoa’s joint venture with Baiyunshan Guangyao Baiyunshan, Hutchison also co-founded a company called Beijing Tongrentang Hutchison Pharmaceutical Investment Co., Ltd. with a total investment of 780 million yuan.

In 2000, Hutchison TCM, a wholly-owned subsidiary of Hutchison Whampoa, jointly established Tongrentang Hutchison (Hong Kong) Pharmaceutical Development Co., Ltd. in Hong Kong with Tongrentang Technology, with a total investment of 200 million Hong Kong dollars. After Tongrentang Technology was listed in Hong Kong, Li Ka-shing invested nearly 20 million Hong Kong dollars through Hutchison Whampoa to buy 10% of the shares and became the second largest shareholder.

In 2012, Li Ka-shing also established a joint venture with the international giant Nestlé to develop Chinese medicines for the treatment of gastrointestinal diseases.

In 2014, in order to expand the main raw material planting base and production workshop of compound Danshen tablets and Banlangen, the company also plans to invest 1 billion yuan.

In 2018, Li Ka-shing invested another 500 million yuan to establish a panax notoginseng production base in Yunnan.

Looking back on the decades of entering the medical field, Li Ka-shing’s pursuit of health, youth, and life has become more and more obvious.

When he entered the Chinese medicine industry in 1999, Li Ka-shing had just been named the world’s richest Chinese by Forbes when he was 71 years old.

Wealth has reached its peak, but life is heading home. It is inevitable that people will not be reconciled.

The direct line of Yangtze River Life Technology was also established in the following year. The purpose of this company is to “improve human health and environmental ecology, and strive to enhance the quality of human life.” The Li Ka-shing Foundation holds nearly 30% of its shares, showing its support. According to related reports, the company’s focus on the field of biological sciences was also suggested by Li Ka-shing.

Since then, Li Ka-shing has shown great enthusiasm for basic research in life sciences.

In 2011, the Li Ka-shing Foundation donated US$40 million to the University of California, Berkeley to establish the “Li Ka-shing Center for Biomedicine and Health Sciences.”

In 2014, he donated another 10 million U.S. dollars to support the genomics innovation projects of the University of California, Berkeley and San Francisco.

The two winners of the 2020 Nobel Prize in Medicine and Chemistry-Michael Houghton, Director of the Li Ka-shing Institute of Applied Virology, University of Alberta, Canada, and American biologist, University of California, Berkeley , Li Ka-shing Biomedicine and Jennifer A. Doudna, Chair Professor of Health Sciences, has benefited from donations from the Li Ka-shing Foundation.

The reasons for their award are the discovery of hepatitis C virus and gene editing. The latter is a study of changing the DNA of animals, plants and microorganisms through gene scissors. Both are major breakthroughs in life sciences and have a huge impact on the development of the pharmaceutical industry. .

CK Life Sciences has been promoting melanoma vaccine R & D projects, such as fruit into power, but also against the “death” of the big kill.

Li Ka-shing's last battle

By 2017, Li Ka-shing will simply invest 200 million Hong Kong dollars directly to develop and sell “elixirs”. The main components of these drugs, NMN (full name β-nicotinamide mononucleotide) and NR (nicotinamide ribose), are highly praised by the public and the capital market.

For a while, “Recommended by Li Ka-shing” and “Thirty Years Young” became a must-have gimmick in the promotion of similar products.

Indeed, what is more persuasive than a 90-year-old man walking fast and holding a 30-year-old girlfriend’s hand to go shopping?

Some people even said, “As long as Li Ka-shing is still alive, the elixir I bought is real.” “Even if Li Ka-shing fails to achieve immortality, he is still contributing to human immortality.”

However, let alone whether the dream of immortality can be realized, Li Ka-shing, who has long sleeves in the capital market, seems to be useless in the field of medicine.

04 Burn other people’s money and make your own medicine

Due to various reasons, the Chinese Medicine Port has not achieved the expected development.

Since 2019, experts have successively unveiled the mystery of NMN and NR. The so-called “elixirs” have actually been tested on mice, but their effects on humans have not yet been verified. The State Administration for Market Regulation of China quickly “blocked” related products.

The “further research and development work” of Changjiang Life Science and Technology on new AIDS treatments finally came to an end. And its melanoma vaccine under development has gone through 9 years of research and development, and it is still unclear when it will be launched. Under normal circumstances, the usual R&D cycle of biopharmaceuticals is 7-8 years.

In contrast, Hutchison Medicine’s performance is relatively good, at least three innovative drugs have been approved, but losses are still expanding.

According to the prospectus, from 2018 to 2020, Hutchison Pharma’s annual loss has increased from US$74.8 million to US$106 million, and then to US$126 million.

The company’s explanation for this is “high R&D expenditures.” According to the prospectus, since 2018, Hutchison Pharmaceutical’s R&D expenditures have been US$102.4 million, US$127.4 million, and US$175.5 million, respectively. In other words, in the past three years alone, the research and development of new drugs has burned US$405.3 million.

But this does not conceal the dilemma that its product sales are not optimistic.

And Huang medicine has been approved and commercialized two products: 2018 approved Furosemide quinoline imatinib (trade name: love UTE ) and in 2021 approved cable where imatinib (trade name: Su Taida), market Poor performance. Among them, Fruquintinib will enter the medical insurance with a big price cut in 2020, with sales of 33.7 million U.S. dollars (equivalent to 200 million yuan) in the year, while the domestic PD-1 sales in the medical insurance reached the level of 1 billion in the same period.

His own hematopoietic ability is not strong, and Li Ka-shing’s entire commercial landscape does not support the research and development of innovative drugs.

Compared with the generous investment in the traditional Chinese medicine industry, the main sources of funds for the research and development of innovative drugs of Hutchison Medicine are joint ventures, financing, and listing.

According to the prospectus, Hutchison Medical has received financial support from Changjiang Hutchison since its establishment, mainly in the form of bank loan commitments. In addition, it is the money obtained in the form of other third-party investments, listings, and subsequent sales.

It can be seen that by the end of 2020, the company and its partners have invested more than US$970 million in the oncology/immunization business, and this amount is basically similar to the total number of corporate financing in recent years.

In the past 20 years, Hutchison Medicine has experienced at least 6 rounds of financing, including 3 public listings, which were listed on the London Stock Exchange in 2006 and listed on the Nasdaq in 2016, and submitted an application to the Hong Kong Stock Exchange. , Officially ringing the bell on June 30, 2021. The total amount of these financing is exactly about 1 billion US dollars.

And from the perspective of income structure, under the shell of innovative medicine, the Chinese medicine and commercial sectors are responsible for the strength.

From 2018 to 2020, Hutchison Medical’s revenues were US$214.1 million, US$204.9 million and US$228.0 million, respectively.

Among them, the revenue from the tumor/immunization business was US$41.233 million, US$26.792 million and US$30.215 million, accounting for 19.25%, 13.08%, and 13.25% of the total revenue. The main revenue came from other businesses, namely the distribution of prescription drugs and health products. And marketing, etc.

Although Yangtze River Life Technology has several products under development, such as melanoma vaccines, its R&D investment is less than 10%.

The 2017 annual report shows that research and R&D investment is about 174 million Hong Kong dollars, accounting for 3.5% of the total income of 4.97 billion Hong Kong dollars that year, even if it accounts for only 6.4% of human health business income; in 2020, R&D investment will be further reduced to 1.49773 Billion Hong Kong dollars, about 3% of total revenue.

Li Ka-shing's last battle

▲The income and R&D investment of Yangtze River Life Technology in the past two years. Source: Yangtze River Life Technology Company Financial Report 

The large investment in the pharmaceutical field, long research and development cycles, and longer payback periods are contrary to Li Ka-shing’s consistent business philosophy of “buy low, sell high”.

From the perspective of the market, competition in the small molecule targeted drug market is still very fierce, and the prospects are not optimistic.

And mostly yellow medicine research and product PD-1 combination therapy, which has commercial intent is clear, it is to take immunotherapy “Shun windmill .” It’s just that the results of the research have not been finally revealed, and it is not yet known whether they can get on the car.

Although the short term, medicine and yellow smooth landing Hong Kong, Li Ka-shing’s wealth rose to achieve, but in the long run, whether the achievements of medicine and a wealth of Li Ka-shing miracle, probably also need more data to say the words.

But for the 92-year-old Li Ka-shing, expanding the pharmaceutical industry may also be the last battle in its commercial territory.

Reference

[1] “Li Ka-shing’s Layout of Chinese Medicine Port” Author: Tao Zhengzhou, Ying Yunfu 

[2] “Li Ka-shing’s company is suddenly on fire! Soaring nearly 300% in 2 days, it turns out that the “magic vaccine” is coming” China Fund News 

[3] “Reverse: Li Ka-shing’s “Elixir of Life” is only effective in mouse experiments” cc Intelligence Bureau 

[4] “Li Ka-shing eyes really poison: only took 300 million, it punched a Nobel Prize” positive solution Bureau 

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