New Stock Outlook | Genuine Biotech IPO Life and Death Speed: The Azvudine Dividend Fades, 900 Million Repurchase Crisis Looms

On March 7th, Genuine Biotech Limited (hereinafter referred to as: Genuine Biotech) submitted its application to the Hong Kong Stock Exchange, with China International Capital Corporation as the sole sponsor.

When it comes to Genuine Biotech, many may not be unfamiliar. Yes, it is the developer of the first oral drug for COVID-19 in China—Azvudine. With Azvudine, Genuine Biotech achieved over 1 billion yuan in sales in less than six months in 2022.

Riding on the success of Azvudine, Genuine Biotech submitted its application to the Hong Kong Stock Exchange in August 2022 but did not succeed in going public. It is worth mentioning that Azvudine is not only used for treating the COVID-19 virus; in the field of AIDS, Azvudine is currently the only dual-target oral nucleoside drug in the world.

Although Azvudine has been expanded for multiple indications, it has not enabled Genuine Biotech to achieve profitability. In the past two years, Genuine Biotech has accumulated losses of 824 million yuan (same unit below). With the decline of COVID-19, the market demand for oral COVID-19 specific drugs has sharply decreased. Can Genuine Biotech, which relies on Azvudine, successfully make a second attempt at the Hong Kong Stock Exchange? What new changes have occurred in Genuine Biotech after nearly 30 months of silence?

Over 800 million in losses over two years, cash flow tightens

According to Zhitong Finance APP, Genuine Biotech was established in 2012 and is headquartered in Pingdingshan, Henan, focusing on the research and commercialization of innovative drugs for antiviral, oncology, and cardiovascular diseases.

In 2020, Henan Zhenzhi completed its restructuring, becoming a wholly-owned subsidiary of Genuine Biotech, thus starting its capital journey. From 2021 to 2022, Genuine Biotech completed two rounds of financing, raising nearly 713 million yuan, with investors including Jinbailin Investment, Yifeng Capital/Yingke Capital, Yashang Capital, Fuqiang Financial, and Disainuo, among others. After completing the B round of financing in April 2022, the company's valuation reached 3.56 billion yuan.

As the valuation continued to rise, Genuine Biotech's financial situation became increasingly tight. According to the prospectus, in 2023 and 2024, Genuine Biotech is expected to achieve revenues of 344 million yuan and 238 million yuan, respectively, with losses of 784 million yuan and 40.042 million yuan during the same periods, totaling over 800 million yuan in losses over two years.

Regarding the significant losses, Genuine Biotech stated in the prospectus that it was mainly due to the end of COVID-19, leading to a decrease in market demand for Azvudine. In 2023, the company recognized an inventory impairment of 353 million yuan, and in 2024, an inventory impairment of 34.859 million yuan.

This means that the core drug Azvudine cannot provide "blood supply" for Genuine Biotech. Without a sustainable blood supply capability, Genuine Biotech's cash flow is also concerning. According to Zhitong Finance APP, as of the end of 2024, Genuine Biotech's cash and cash equivalents are approximately 138 million yuan, a decrease of about 101 million yuan compared to the same period in 2023

However, in recent years, Genuine Biotech has not conducted any new financing. Under tight funding conditions, according to the prospectus, the shareholder agreement signed between Genuine Biotech and its shareholders stipulates relevant matters regarding redemption rights. If the company fails to complete its listing within 41 months after the first submission (i.e., December 2025), it will trigger a buyback. The buyback of preferred shares at an annual interest rate of 10% amounts to approximately 967 million yuan, far exceeding the current cash reserves.

Genuine Biotech first submitted its application in August 2022, and 31 months have passed so far. With less than a year remaining, if the buyback is triggered, Genuine Biotech will face significant financial pressure.

It is worth mentioning that in 2023 and 2024, Genuine Biotech recorded fair value losses of 75.1 million yuan and 79.5 million yuan on convertible redeemable preferred shares, respectively; during the same period, the total expenses for equity-settled, share-based payments were 2 million yuan and 2.5 million yuan, respectively. Additionally, by the end of 2024, Genuine Biotech's net current liabilities reached 85.685 million yuan, and its annual R&D and operating expenses exceeded 200 million yuan, indicating a significant funding gap.

Although the company has reduced R&D expenses, with a year-on-year decrease of 36.5% to 151 million yuan in 2024, temporarily narrowing losses, this move may delay pipeline advancement and further weaken long-term competitiveness.

Core Product Azvudine Faces Strong Competition, Other Pipeline Progresses Slowly

According to the prospectus, Genuine Biotech currently has four R&D pipelines: HIV drug pipeline, COVID-19 drug pipeline, anti-tumor drug pipeline, and central nervous system (CNS) candidate drugs. Among these, the first three pipelines clearly involve Azvudine. However, apart from the two approved products for HIV infection and COVID-19 indications, most of the other drug combinations are currently in preclinical or clinical development stages. Notably, the anti-tumor drug pipeline is the area where Genuine Biotech is heavily invested; among the 17 drug combinations disclosed, 12 are related to the anti-tumor field, covering various malignancies such as non-small cell lung cancer, liver cancer, colorectal cancer, prostate cancer, lymphoma, and acute leukemia.

Azvudine is its only commercialized product. In July 2022, this drug was approved for the treatment of adult mild COVID-19, becoming the first oral new special drug in China, directly competing with Pfizer's Paxlovid, with cumulative sales exceeding 10 million bottles, covering more than 50,000 medical terminals across 31 provinces and cities nationwide.

First, let's look at the core product Azvudine. It is understood that Azvudine is a pyrimidine nucleoside drug with broad-spectrum antiviral activity In terms of antiviral treatment, Adefovir has been developed for the treatment of HIV and the novel coronavirus. The prospectus shows that in July 2021, the National Medical Products Administration conditionally approved Adefovir for the treatment of HIV-1 infected patients over the age of 18 with high viral loads (HIV-1 infected patients account for more than 90% of all HIV infected patients worldwide). According to Frost & Sullivan, Adefovir is the only dual-target oral nucleoside drug for the treatment of HIV globally, functioning simultaneously as an NRTI and a Vif auxiliary protein inhibitor. Therefore, Adefovir can be combined with antiretroviral drugs of different mechanisms, serving as a backbone drug in various dual or triple ART regimens.

To further leverage the advantages of Adefovir, Genuine Biotech also plans to develop an Adefovir/CL-197 combination tablet, with Adefovir as the main component, for the treatment of HIV infection. Animal experiments have demonstrated that both Adefovir and CL-197 have a half-life of 168 hours, and Genuine Biotech believes that the Adefovir/CL-197 combination tablet has the potential to become the world's first once-weekly oral long-acting combination drug, enhancing patient compliance.

Regarding the treatment of the novel coronavirus, in July 2022, Adefovir received conditional approval for the treatment of adult mild COVID-19. It has now been officially included in the national medical insurance catalog of 31 provincial branches, covering more than 50,000 medical institutions across China. The price per bottle of Adefovir is relatively low, making it an economically burdensome treatment option, significantly improving accessibility and affordability of treatment.

In addition to antiviral applications, Genuine Biotech is also developing Adefovir for the treatment of cancer patients.

According to the prospectus, as the only dual-mechanism highly selective nucleoside drug in the past 30 years, Adefovir can exert anti-tumor effects by inhibiting tumor cell DNA synthesis and enhancing immunity through immune modulation.

The mechanism of action mainly involves Adefovir inhibiting cancer cell proliferation by terminating DNA chain elongation and interfering with various enzymes involved in nucleic acid synthesis in cancer cells. The tumor-suppressive effect of this mechanism is correlated with the expression of dCK; it is particularly significant in tumor types with high dCK expression in tumor tissues, such as lymphoma and leukemia. Additionally, Adefovir can also act as an immune modulator, significantly reducing the excessive accumulation of myeloid-derived suppressor cells (MDSCs) in the tumor microenvironment, promoting the infiltration and proliferation of CD8+ T cells, CD4+ T cells, and natural killer (NK) cells, thereby exerting anti-tumor effects. The tumor-suppressive effect of this mechanism is correlated with the expression of MDSCs in the tumor microenvironment, and it is more effective in solid tumors with high MDSC infiltration, such as liver cancer, colorectal cancer, and non-small cell lung cancer.

Through the above mechanisms, Adefovir has been developed by Genuine Biotech for combination use with PD-1 for the treatment of liver cancer and colorectal cancer.

Currently, Genuine Biotech has obtained IND approval from the National Medical Products Administration for clinical trials of Adefovir in the treatment of patients with advanced solid tumors and plans to initiate Phase I clinical trials in January 2025. As of the last feasible date, 3 patients have been recruited Although Genuine Biotech Limited stated that Azvudine seems like a "panacea" for treating antiviral and antitumor conditions, in reality, its commercial "value" is quite limited from the perspective of commercialization, and thus Genuine Biotech Limited cannot achieve sustained self-sustaining capabilities.

As for the antitumor aspect, it is even less promising, currently only in the early stages, and whether it can be successfully developed remains a significant question. In addition, other products are also in early stages. For example, the company's other product CL-197 submitted its IND in China in July 2022 and received IND approval in October 2022, but as of now, it is still in Phase I clinical trials.

Moreover, another product, Dositinib, is also in Phase I clinical trials. It is understood that Dositinib is a highly active and highly selective oral epidermal growth factor receptor (EGFR) targeted candidate drug for the treatment of advanced EGFR mutation-positive non-small cell lung cancer.

Although EGFR has been a hot target in recent years, Genuine Biotech Limited's progress is currently slow; as of the last feasible date, it had only recruited 23 patients for the Phase I clinical trial. By the time it is commercialized, the market for EGFR will likely be a red ocean.

It is not difficult to see that despite 31 months having passed since the last submission of the prospectus, Genuine Biotech Limited still relies on Azvudine, with other drugs progressing slowly, making it difficult to become a growth point in the short term. Compared to industry trends, by 2025, the biotechnology sector will focus more on breakthroughs in AI-driven drug discovery, cancer vaccines, and gene editing technologies (such as CRISPR therapy), while Genuine Biotech Limited's pipeline layout is relatively traditional and lacks differentiated innovation.

Additionally, based on the COVID-19 windfall in 2022, Genuine Biotech Limited's primary market valuation is 3.56 billion yuan, with a projected price-to-sales ratio of 14.96 times in 2024, far exceeding the average of the Hong Kong biotechnology sector (0.82-0.85 times), and its net assets are negative.

Conclusion

Genuine Biotech Limited's IPO journey is like a game against time. As a pharmaceutical company that once rose to prominence due to the COVID-19 windfall, its over-reliance on Azvudine's business model appears particularly fragile after the pandemic subsides. Although the company attempts to seek breakthroughs by expanding its antitumor pipeline, the slow R&D progress and traditional technology routes make it difficult to gain an advantage in emerging fields such as AI and gene editing. If the IPO is successful, it may temporarily alleviate financial pressure; if it fails, the buyback crisis of up to 967 million yuan could become the last straw that breaks the camel's back. In the future, Genuine Biotech Limited urgently needs to break free from "single-drug dependency" and regain market confidence through differentiated innovation and efficient commercialization capabilities; otherwise, even if it successfully enters the capital market, it will struggle to escape the long-term valuation pressure