Order Backlog Expected to Empower Future Growth with Increasing Long-term Competitive Advantages
Financial Highlights for the 6 months ended June 30, 2022:
- Revenue amounted to RMB1,108.7 million, representing a year-on-year (“YoY”) increase of 8.0%
- Gross profit amounted to RMB345.0 million, representing a YoY increase of 9.1%
HONG KONG, Aug. 29, 2022 /PRNewswire/ — On August 29, 2022, Viva Biotech Holdings (1873.HK) announced that during the period ended June 30, 2022 (the “Reporting Period”), the revenue of the Group increased to RMB1,108.7 million from RMB1,026.5 million for the corresponding period last year, representing a YoY increase of approximately 8.0%. The gross profit increased from RMB316.3 million for the corresponding period last year to RMB345.0 million, representing a YoY increase of approximately 9.1%. The Group’s adjusted net profit reached RMB89.0 million. This was mainly due to the resurgence of COVID-19 in mainland China, limiting the delivery of the Group’s products and services to customers; and market fluctuation, resulting in loss from fair value changes in the Group’s portfolio companies.
CRO Business Poised for Positive Prospect in the Long Run Despite COVID-19-induced Short-term Fluctuations
As of June 30, 2022, the Company’s revenue from CRO business increased by approximately 26.5% from RMB321.0 million for the corresponding period of last year to RMB406.0 million. Given that the persistent rage of COVID-19 in mainland China in the first half of 2022 had a certain impact on productivity in laboratories and product delivery progress, the growth rate of CRO business in the first half of 2022 slightly lagged compared with the corresponding period of last year.
From the long-term perspective, the Company’s order backlog amounted to approximately RMB1,150.0 million, representing an increase of approximately 35.6% from RMB848.0 million for the corresponding period of last year, which provides a sufficient impetus for future growth. The Company’s core competitiveness in the CRO drug discovery field was not undermined but is poised for a positive prospect in the long run.
The Company had delivered more than 39,643 protein structures to clients, approximately 5,252 of which were newly delivered in the first half of the year, and conducted R&D on over 1,857 independent drug targets, 47 of which were newly delivered in the first half of the year. The cumulative number of clients served had increased to 1,111, with a geographical diversified base. The revenue from overseas contributed approximately 83.6% of total revenue, representing a YoY increase of approximately 26.0%, and the revenue from mainland China contributed approximately 16.4% of total revenue, representing a YoY increase of approximately 28.9%.
During the Reporting Period, the utilization of synchrotron radiation source reached 962 hours. The Company established long-term cooperation with 12 synchrotron radiation source centers around the world, thus guaranteeing uninterrupted data collection all year round.
Facilitating CDMO Capacity Expansion and Strengthening CMC Capacity Building
During the Reporting Period, the Group made great efforts to strengthen the strategic integration with Langhua Pharmaceutical. On the one hand, the Group intensified the construction of chemistry, manufacturing and control (“CMC”) R&D centers and continued to facilitate the layout and materialization of new production capacity; on the other hand, the Group strengthened client outreach and business development activities for business growth.
Langhua Pharmaceutical’s revenue for the first half of 2022 amounted to RMB702.7 million, representing a YoY decrease of approximately 0.4%, which was mainly because certain revenue will be recognized in the third quarter as customers voluntarily requested a delay in product delivery as affected by COVID-19 during the Reporting Period, resulting in pressure on the growth rate of revenue in the first half of 2022. Langhua Pharmaceutical’s CDMO backlog orders of approximately RMB700.0 million will lay a solid foundation for business performance in the second half of the year. As of June 30, 2022, Langhua Pharmaceutical had served a total of 836 clients, with the top ten clients accounting for 52.7% of its total revenue, suggesting constant improvement in customer revenue structure. The retention rate of the top ten clients was 100%.
In respect of CDMO capacity building, the upgrade and renovation of the T10 plant was completed by the end of the third quarter last year, and has been officially put into operation. At present, Langhua Pharmaceutical’s total available capacity reached 860 cubic meters, of which, however, T02 plant was still in the preparation stage for trial production as the installation of new capacity in T02 plant was delayed due to the impact of COVID-19. Both T02 plant and T10 plant are Langhua Pharmaceutical’s GMP-level plants located in its Taizhou factory. It is expected that the official operation of T02 plant in future will contribute to a further revenue increase for the Company.
Established External Investment Funds for EFS Investment & Incubation Business
During the Reporting Period, the Company reviewed a total of over 363 projects globally, added 3 start-ups to the portfolio companies, made new investments in two funds and made additional investments in 4 existing portfolio companies. As of June 30, 2022, the Company had invested in a total of 90 portfolio companies. The portfolio companies are mainly from the United States, Canada, Europe and China. 64.0% of the portfolio companies are from North America and 23.0% are from China.
In the first half of 2022, 10 of the portfolio companies completed or almost completed a new financing round, raising approximately US$133.0 million in total. The R&D efforts of the portfolio companies were progressing smoothly, with the total number of pipeline projects increasing to almost 199, of which nearly 40.0% had entered PCC/IND and the clinical stage. At present, the Group has successfully realized the 8 investment exits or partial exits and has 11 potential exits with the portfolio companies in the next one to three years.
In addition, the Company is proactively applying for a fund manager license and proposes to conduct incubation business through the establishment of external investment funds in the future.
Technological Highlights and R&D Breakthroughs
During the Reporting Period, the Group’s R&D spending was RMB40.9 million, representing a YoY increase of 9.1% from RMB37.5 million for the corresponding period of last year. For CRO business, the Group built several core technological platforms, including AI technology assisted drug research and development, antibody and macromolecule discovery, photochemical reaction platform and Cryo-EM (Micro-ED).
Besides, the Company also provides services relevant to PROTAC drug R&D, and revenue generated in this regard accounted for almost 7.4% of total revenue from CRO business. The services primarily include studies on protein preparation and crystal structure, high-throughput screening of PROTAC molecules, kinetics, drug metabolism, pharmaceutical chemistry, Bioassay, CADD, etc. As of June 30, 2022, the Company had conducted research into over 30 E3 ligase structures and delivered nearly 80 target protein-PROTAC-E3 ligase ternary compound structures. It is expected that PROTAC business will add fresh impetus to the sustainable growth of CRO business in the future.
For CDMO business, the Group enhanced automation renovation efforts to further improve the production automation level. In terms of process, the Group continued to build up the continuous reaction technology, catalyst screening platform, oral preparation production line platform, injection research and development platform, non-fixed dispersion technology platform, etc.
Continued to Expand the Scale of Staff and Facilities
As of June 30, 2022, the Group had a total of 2,309 employees, of whom CRO R&D personnel reached 1,354, representing a YoY increase of approximately 37.9%. The Company has been accelerating the construction of office and laboratory facilities in line with its workforce expansion plans and expanding production capacity to meet the fast-growing business needs.
- The Incubation Center located in Faladi Road, Shanghai covering 7,576 square meters has been put into full operation in the first quarter of 2021, including 5,552 square meters of laboratory area.
- The Group’s new headquarters in Zhoupu, Shanghai with a total area of approximately 40,000 square meters was partially put into use in December 2021.
- The park with a total GFA of 64,564 square meters in Chengdu has been completed, of which 12,000 square meters of properties have been partially put into use in December 2021, including 10,590 square meters of laboratory area.
- The novel drug incubation center with a GFA of approximately 77,500 square meters in Qiantang New District, Hangzhou has commenced construction in July 2021.
- The park with a GFA of approximately 7,169 square meters in Suzhou, including 3,250 square meters of laboratory area.
- In November 2021, the Group signed a strategic cooperation agreement with Jiaxing Municipal Government to set up the Viva Biotech AI Novel Drug Incubation Center in Xiuzhou District, Jiaxing.
Dr. Cheney Mao, Chairman and Chief Executive Officer of Viva Biotech Holdings, said, “With unique advantages in structure-based drug discovery (SBDD), the Company will continue to strengthen the construction of a one-stop drug R&D and manufacturing service platform, deepen the synergy between CRO and CDMO business, improve the capacity building for front-end projects to increase the funnel effect, accelerate back-end direction of customer traffic, and actively build an open cooperation platform and win-win ecosystem for biomedical innovators around the world.”
About Viva Biotech Holdings
Established in 2008, Viva Biotech (01873.HK) provides one-stop services ranging from early-stage Structure-Based Drug R&D to commercial drug delivery to global biopharmaceutical innovators. We offer leading early-stage to late-phase drug discovery expertise by integrating our dedicated team of experts, cutting-edge technology platforms, and state-of-the-art equipment in X-ray crystallization, Cryo-EM, ASMS, SPR, HDX, CADD, and much more. Our business covers all aspects of therapeutic strategies and drug modalities, including small molecules and biologics across the pharma and biotech spectrum. With our subsidiary, Langhua Pharma, we offer our worldwide pharmaceutical and biotech partners one-stop integrated CMC (Chemical, Manufacturing, and Control) service from preclinical to commercial manufacturing. Additionally, Viva embedded an equity for service (EFS) model to high potential startups to address unmet medical needs.
As of June 30, 2022, Viva Biotech has provided drug R&D and production services to 1,947 biotech and pharmaceutical clients around the world. We have invested and incubated 90 biotech start-ups in total. In the future, the Company will continue to strengthen its technical barriers, improve R&D and production level, and the service capacity, so as to provide high-quality and diversified services for more drug discovery start-ups, as well as the medium and large pharmaceutical enterprises around the world. We hope to benefit more patients through Viva’s platform.