On December 9, China Biotech Service (08037.HK) issued an announcement. On December 8, 2023, the company, Shanghai Longyao (an indirect non-wholly owned subsidiary of the company) and the investor Yixing Environmental Science Park Equity Investment Partnership (Limited Partnership) entered into a capital injection agreement of RMB 48 million. According to this (i) investors agreed to make a capital injection of RMB 48 million, of which RMB 2,99,670 was used to subscribe for 5.35% of Shanghai Longyao's registered share capital, and RMB 47.01 million into Shanghai Longyao's share capital reserve. ii) Company It was agreed (through a wholly-owned subsidiary to be established in China) to make a capital injection of RMB 49.96 million, of which RMB 1.03 million will be used to subscribe for 5.57% of Shanghai Longyao's expanded registered share capital, and RMB 48.93 million will be included in Shanghai Longyao's share capital reserves.
(iii) Grant investors put options. In the event of any redemption event, investors have the right to request Shanghai Longyao to buy back at the put price, or (if Shanghai Longyao fails to do so) to require the company to acquire all or part of the investor's shares in Shanghai Longyao at the put price, and (iv) grant the company subscription options, which the company can exercise at its discretion on or before December 31, 2024, according to which the company can acquire all or part of the investor's shares in Shanghai Longyao.
After the capital injection is completed, the Group's immediate actual equity interest in Shanghai Longyao will be reduced from about 68.13% to about 1.87% to 66.26%. Shanghai Longyao will remain a subsidiary of the company, and its performance, assets and liabilities will continue to be incorporated into the company's consolidated financial statements.
Shanghai Longyao is a limited company established in China on September 16, 2013. It is mainly engaged in the research and development of CAR-T therapy.
CAR-T cell therapy has proven to be clinically effective and safe in treating several types of cancer. The company believes that Shanghai Longyao's CAR-T cell immunotherapy technology has great potential in clinical cancer treatment. According to the agreement between the parties, Shanghai Longyao will use all proceeds from the capital injection to renovate the GMP production base and purchase instruments and equipment, clinical research on CD20-CART-OX40, and research and development of other product projects. The capital injection will advance the company's plans to seize the growth opportunities of CAR-T cell therapy and the Group's other major businesses.
Furthermore, the current shareholders of Shanghai Longyao plan to successfully list Shanghai Longyao on the stock exchange by December 31, 2027. However, this is still a preliminary plan at present, and no specific recommendations have been made or a specific timing for a successful listing has yet been determined. The directors believe that bringing in investors would be beneficial to the Group in terms of providing equity financing to Shanghai Longyao and its subsidiaries to support their development and promote future financing activities. If Shanghai Longyao fails to go public as scheduled, put options also provide investors with a reasonable option to withdraw their interests. Since Shanghai Longyao, as a private Chinese company, does not have an open market for equity transactions, the directors believe that the exit option is a common market practice for pre-listing investments.