Autoimmune diseases are growing rapidly around the world, spawning major drugs such as Schumerol.

However, in China, such diseases do not directly endanger lives; they only affect quality of life, and have been ignored for a long time. However, as income levels increased and concerns about health and quality of life increased, autoimmune diseases began to receive more and more attention. China's self-defense market will usher in a period of explosion.

Recently, Jiangsu Quanxin Biopharmaceutical Co., Ltd. passed a hearing on the Hong Kong Stock Exchange and will register on the main board of the Stock Exchange in the near future. After Connor, it became another 18A company focusing on autoimmune diseases.

According to Quanxin Biotech's financial situation, the company's need for listing financing is particularly urgent. As of the end of September 2023, Quanxin Biotech's total cash and cash equivalents were only 257 million yuan, while in the first nine months of 2023, the company's operating cash outflow had reached 252 million yuan.

This indicates that the company's current cash reserves are insufficient to maintain a year's operating needs.

As a company focusing on the development of autoimmune products, Quanxin Biotech has 9 products under development, and many products have already entered the clinical stage.

Clinical trials of self-exempt products usually require a larger number of participants, and the corresponding costs are also higher. Take IL-4Rα, the representative product of Quanxin Biotech, as an example. The product targets more than 7 types of indications, all of which are in the clinical stage or have obtained clinical trial approval, which indicates that the company's future capital requirements will further increase.

Listing financing is an important way for Quanxin Biotech to ease financial pressure. Since the company expects its earliest commercial product, QX001S, to be launched on the market in the fourth quarter of 2024, financing for Quanxin Biotech is particularly critical in 2024, before achieving self-hematopoiesis.

Huadong Pharmaceutical is the largest external shareholder

Prior to this IPO, Quanxin Biotech had completed 6 rounds of financing, with a financing amount exceeding 1.26 billion yuan

Qiu Jiwan, founder of Quanxin Biotech, and Yu Guoan acted in concert and held a total shareholding of about 33.59% of the shares based on Qiu Jiwan's decision. It is worth noting that Huadong Pharmaceutical (000963.SZ) is the second largest shareholder of the company through a 17.09% shareholding in Huadong from China and the US.

However, the origin of Qiu Jiwan, the founder of Quanxin Biotech, and Huadong Pharmaceutical can be traced back to Jiuyuan Gene.

In 1993, Huadong China and the US, a wholly-owned subsidiary of Huadong Pharmaceutical, jointly established Jiuyuan Gene with various companies including Fox Biotech and Yuyou Construction. Qiu Jiwan, founder of Quanxin Biotech, worked at Jiuyuan Gene from July 1993 to January 2004, and was the director of the research institute when she left her job.

As for Quanxin Biotech, Huadong Pharmaceutical favors it. In 2020, Huadong from China and the US invested 370 million yuan to become the second largest shareholder of Quanxin Biotech. This deal has also become Huadong Pharmaceutical's important investment in the field of self-protection in recent years.

In addition, Huadong Pharmaceutical has also purchased domestic rights in Quanxin Biotech's usinudan biosimilar drug, and is expected to become the first usinumab biosimilar drug in China.

Quanxin Biotech also relied more on Huadong Pharmaceutical's commercialization capabilities in this series of transactions.

Usinumab analogs were the company's first commercialized products

QX001S is the first commercial drug expected by Quanxin Biotech. It is also the first domestically produced usinumab biosimilar drug to submit BLA in China.

In August 2023, the State Drug Administration accepted the marketing application for QX001S to treat moderate to severe plaque psoriasis in adults. QX001S is expected to be the first approved usinumab biosimilar drug in China. The company is expected to be the first to go public in China in the fourth quarter of 2024.

In August 2020, Quanxin Biotech and Huadong Pharmaceutical reached a cooperative development and commercialization agreement for the QX001S in mainland China. The total down payment and milestone payment received by Quanxin Biotech was 50 million yuan, and in the future, half of the product's pre-tax profit will be obtained in the form of shares.

The original research drug for QX001S, Johnson & Johnson's usinumab sold 10.8 billion US dollars for the full year of 2023, an increase of 11% over the previous year, making it another 10 billion US dollar self-exempt product after Yao Wang Xiumile.

The introduction of QX001S will strengthen Huadong Pharmaceutical's product portfolio in the field of dermatology, particularly in the treatment of diseases such as psoriasis and atopic dermatitis. With self-developed and introduced strategies, Huadong Pharmaceutical has accumulated a variety of topical dermatology drugs, covering the needs of different disease severity levels. The addition of QX001S is expected to form a high degree of synergy with existing products and become a key part of Huadong Pharmaceutical's dermatology strategy.

However, domestic biosimilar competition will be more intense compared to innovative drugs, and the company itself indicated risks in its prospectus, believing that the QX001S will face commercial competition with at least two other similar drugs in the domestic market.

Despite fierce competition from similar biosimilar drugs, Huadong Pharmaceutical's commercialization capability is expected to provide strong sales support for Quanxin Biotech.

As the QX001S drug marketing license holder in China, China and US Huadong will be responsible for the exclusive marketing activities and commercialization of the product. Meanwhile, Jiangsu Safus, a CMC subsidiary of Quanxin Biotech, will be solely responsible for the commercial production of products in China and calculate the supply price using a cost plus of 25%.

With the launch of QX001S, Quanxin Biotech is expected to usher in its first operating cash flow, marking the beginning of the company's ability to generate its own hematopoietic activity.

Simultaneous clinical trials for multiple indications of IL-4Rα products, with prurigo nodular (PN) as the differential direction

Quanxin Biotech's core product QX005N (a monoclonal antibody against IL-4Rα) has obtained IND licenses for 7 indications, making it the most IL-4Rα antibody drug approved by IND in China.

In particular, in the treatment of atopic dermatitis (AD) and prurigo nodular (PN), QX005N will soon launch a phase III clinical trial in China. The AD market has huge potential and has become the focus of competition for many pharmaceutical companies. Meanwhile, Quanxin Biotech is the only domestic company that conducts clinical trials of biopharmaceuticals in PN patients, showing its differentiated strategic layout.

On January 31, 2024, the Drug Evaluation Center (CDE) of the China Drug Administration listed QX005N as a breakthrough treatment for the treatment of moderate to severe PN in adults, making it one of the few products certified as a breakthrough treatment in the field of self-immunity.

According to Frost & Sullivan data, in 2022, the number of PN patients in China is about 2 million, and is expected to reach about 2.1 million by 2030. Currently, the development of the PN drug market in China is still in its early stages. As of October 2023, dupriumab is the only biologic approved by the FDA and NMPA in China to treat PN.

In terms of biopharmaceutical candidates, only Quanxin Biotech's QX005N and Boan Biotech's BA2101 are in the clinical phase. Both are IL-4Rα inhibitors.

However, Health Yuan, which bought Quanxin Biotech's thymic matrix lymphocyte (TSLP) monoclonal antibody in China at the same time, chose competitor Boan Biotech's IL-4Rα inhibitor to treat respiratory diseases such as asthma and COPD. The reason why Health Yuan did not choose Quanxin Biotech's IL-4Rα product is probably related to product differences.

In addition, the QX002N is also a product that the company is optimistic about. It is a high-affinity monoclonal antibody targeting IL-17A. Quanxin Biotech has obtained IND approval for QX002N for ankylosing spondylitis and lupus nephritis, and plans to prioritize the development of QX002N for ankylosing spondylitis indications.

Clinical needs in the field of autoimmunity are extensive and not fully met, showing the potential for rapid growth. With the further development of the self-exempt market, competition for differentiated products will become the key.